Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

Oral Answers to Questions — DEFENCE

Staff Dispersal

Mr. Galbraith: To ask the Secretary of State for Defence if he will list all current plans for relocation (a) within Greater London and (b) elsewhere of units of his Department.

The Parliamentary Under-Secretary of State for Defence Procurement (Mr. Tim Sainsbury): It is not possible to provide the detailed information sought by the hon. Member without a disproportionate amount of work. However, I can inform the House that the number of civilian staff in London has reduced by over 10,000 — that is 35 per cent.—since 1979. Moreover, we continue to pursue every opportunity to relocate defence work from London when justified in both operational and economic terms.

Mr. Galbraith: The Minister said that the number of jobs in London had been reduced, but does he agree that the number of jobs in other areas of the country has also been reduced? At the previous Defence Question Time the Minister said that only 2·2 per cent. of jobs were located in the north and that that figure had not changed for some time. Therefore, will he take definite steps to relocate jobs in the north and abandon any plans for further office accommodation in London — for example, at Thames House, which does nothing for jobs, but simply helps property speculators in London?

Mr. Sainsbury: I remind the hon. Gentleman that after the Hardman report in 1973, the Labour Government between 1974 and 1979 achieved absolutely no dispersal to Scotland. This Government have a far superior record.

Dr. Hampson: Does my hon. Friend accept that this is not just a matter of the relocation of units of the Department, but is a matter of general spending policy? Is there not a gross disparity in spending between south and north, and will my hon. Friend institute some means of scrutinising the bids from the service chiefs with a view to dispersing them elsewhere in the country?

Mr. Sainsbury: My hon. Friend is aware that there are very good operational reasons for the concentration of defence establishments in the south. However, whereas we have reduced the number of defence posts in London and the south-east by 35 per cent. since 1979 in our search for greater efficiency, the reduction in the number of posts in the northern region over the same period was only 23 per cent.

Mr. Sean Hughes: Will the Minister tell the House why it is necessary for the Ministry to take offices at Thames House? Can he not accept that if his Department located in the north, it would not only save the taxpayer money, but would provide jobs in areas that badly need them?

Mr. Sainsbury: I assure the House that there are no plans to centralise in Thames House, Millbank part of the MOD headquarters staff at present located in London. As I hope the hon. Gentleman is aware, accommodation for London-based headquarters staff is a matter for the Property Services Agency.

Mr. Dykes: As we are talking about buildings as well as jobs, will my hon. Friend say when the Ministry intends to relinquish its buildings in the Stanmore area — both the Royal Air Force and other MOD buildings? In due course that accommodation will be available for pressing housing requirements.

Mr. Sainsbury: That matter is under active review.

Mr. Cartwright: Can the Minister say when he will decide about the future location of the directorate-general of quality assurance? Is he aware that the uncertainty has continued for years and is now starting to affect morale? When he makes a decision, will he bear in mind the contribution of the people of Woolwich to that military establishment and many others, for generations?

Mr. Sainsbury: I appreciate the hon. Gentleman's interest in this matter and I recognise that Woolwich has a long association with the Ministry of Defence. The issues involved in the location of the quality assurance office are complex, and further study is needed before we can reach a decision. However, I hope that it will not be too long before we can give further information.

HMS Conqueror (Log Book)

Mr. Alan W. Williams: To ask the Secretary of State for Defence if he will set up a further inquiry into the disappearance of the log book from HMS Conqueror, in the light of recent allegations that the log book was deliberately destroyed.

The Minister of State for the Armed Forces (Mr. Ian Stewart: As I have already explained in correspondence with the hon. Member, the official concerned categorically denies the allegations. The fact is that he was not, in 1982, nor has he ever been, in a post which would have given him access to naval log books. On that basis, no case has been made out for reopening the inquiry.

Mr. Williams: Is it not the case that the commander of the Conqueror reacted with incredulity to the order to torpedo the Belgrano, that that order had to be repeated three times over six hours and that the messages between Northwood and the Conqueror would have been recorded verbatim in the log book, and that is why the Government ordered its incineration?

Mr. Stewart: The hon. Gentleman does not seem to understand what control room log books are about. They are about technical matters, such as the course, depth and speed of a submarine at a particular time.

Mr. Dickens: Does the Minister agree that the sinking of the Belgrano was operationally correct and necessary, and that the Argentines have agreed that, placed in similar


circumstances, they would have done exactly the same? Why do the Opposition persist in trying to discredit the Royal Navy, when they should be proud of it?

Mr. Stewart: I am sure that my hon. Friend is right, but one does not have to be a Member of the House for very long to know that most of the Opposition's ideas about defence are wonky.

Mr. Dalyell: What on earth could have prompted the former Secretary of State for Defence, the right hon. Member for Henley (Mr. Heseltine), to opine that he wanted
to make sure that there was not a Watergate round here"? Who could he have had in mind for the role of Richard Nixon?

Mr. Stewart: The hon. Gentleman can speculate on all sorts of things, but I cannot follow him on that.

Trident

Mrs. Mahon: To ask the Secretary of State for Defence what are the implications for the safety of the Trident missile programme of the recent test firing of a Trident 2 missile at Cape Canaveral.

The Secretary of State for Defence (Mr. George Younger): The latest test flight of a Trident D5 missile on 21 January revealed a deficiency in the design of one of the missile sub-systems. One of the objectives of project development programmes is to expose any design deficiencies. There have already been eight successful Trident II firings and, overall, the development test programme has been highly successful.

Mrs. Mahon: Is not the truth that the testing was a miserable failure, with the missile exploding after two minutes 43 seconds? Does that not prove that the people who target the missiles are in more danger than those targeted, and would not the money be better spent on the National Health Service and on housing?

Mr. Younger: The objective of such tests is to discover whether the missile systems are working properly, and, as the test clearly demonstrated that this particular missile was not working properly, the test can be said to have been a 100 per cent. success. The hon. Lady might agree on reflection that it is no use having the most perfect health service in the world if one cannot defend the country in which that health service exists.

Sir Antony Buck: Does my right hon. Friend agree that he and the Government are going for the D5 for precisely the same reasons as the Opposition went for updating our deterrent by going for Chevaline without telling anybody?

Mr. Younger: Yes, my hon. and learned Friend is correct. The Opposition updated the Polaris system because they, too, wished it to be effective when they were in office. The sad thing is that they have abandoned responsibility now that they are out of office.

Mr. O'Neill: Does the Minister agree that this is now the second or third hold-up in the project and that the expenditure of £500 million on the latest enhancement programme for Polaris suggests that we are miles behind schedule, contrary to all the undertakings given during the general election?

Mr. Younger: The hon. Gentleman is utterly wrong. There is no hold-up in the Trident system, which is absolutely up to time. [Interruption.] Yes, it is absolutely

up to time, including the warheads, which are being made in Britain. In fact, the manufacture of the warheads was started last month.

Mr. Morgan: In Cardiff, not in Aldermaston.

Mr. Younger: No, in Aldermaston. The tests are designed to make sure that the system is working properly, and the test series has been the most successful of any missile system yet.

Nuclear Weapons

Mrs. Wise: To ask the Secretary of State for Defence what information he has as to the number and nature of nuclear weapons accidents or systems malfunctions.

Mr. Ian Stewart: There has never been an accident involving damage to, or release of radioactivity from, a nuclear weapon in the United Kingdom. Nor has there been any malfunction of systems associated with such a weapon which could have posed a hazard to service men or to members of the public.

Mrs. Wise: Has the Minister seen the "Handbook of Nuclear Weapons Accidents" published by Bradford university? Has he noticed that the handbook lists some horrendous near misses, such as missiles virtually launching themselves because of computer error, or weapons exploding and only by luck not detonating the nuclear warheads? Does the Minister not agree that, in the words of the former United States Admiral Eugene Carroll, our nuclear weapons are just a trigger to commit suicide? Would we not be better off without them?

Mr. Stewart: I am aware of the latest in the series of publications by the Bradford school of so-called peace studies, but, as usual with its publications, this one contains a large number of false assumptions. Not surprisingly, its conclusions are equally astray.

Mr. Squire: Has my hon. Friend seen the profusion of questions on the Order Paper from the Labour party on nuclear weapons? Does he consider reports that the Labour party may be moving towards an acceptance of nuclear weapons as an essential part of our—

Mr. Speaker: Order. The Minister cannot answer for reports about the Labour party.

Mr. Squire: rose—

Mr. Speaker: Order. The hon. Gentleman made rather a duff start.

Mr. Cryer: Can the Minister confirm that there was an accident in Lakenheath in 1956 in which an American plane carrying nuclear weapons crashed on the aerodrome and was allowed to burn out, including its crew, because the danger of radioactive leaks from the nuclear weapons was so horrendous, and that it came within a hair's breadth of causing a major nuclear explosion at that time?
If that is true, why does the Minister not come clean about these nuclear weapons of which he is so proud—these instruments of mass extermination — and accept that they are dangerous to the people of this country?

Mr. Stewart: The assurances that I gave the House in response the original question cover the incident that the hon. Gentleman has mentioned, and all other such incidents.
We maintain stringent standards of safety with nuclear weapons, and it is worth remembering that the nuclear


deterrent has achieved a longer period of peace and stability in the world than we have enjoyed for many centuries.

Nuclear Strategy

Ms. Short: To ask the Secretary of State for Defence what recent representations he has received from the West German Government regarding nuclear strategy.

Mr. Younger: None, Sir.

Ms. Short: Is it not true that Germany is anxious to negotiate away battlefield nuclear weapons, because the Germans are very worried that a nuclear war might be fought on their soil? Instead of welcoming reductions in nuclear thresholds in East and West, the British Government are leading the pack in demanding rearmament in Europe to make up for the INF cuts. I understand that the decisions are to be made in May by NATO Defence Ministers in Denmark. Can the House have an undertaking that we will discuss the matter before those serious decisions are made?

Mr. Younger: The German Government entirely support the nuclear strategy of the NATO Alliance, of which they are prominent members. The Alliance will be discussing the next stages in the process of nuclear disarmament in the next two months. It will, I think, agree that the priorities for the next stage should be a worldwide ban on chemical weapons, and a start on reducing conventional weapons.
As the hon. Lady must surely admit, there is now no doubt that the attitude of the present Government, who have been leading the pack towards reductions in nuclear weapons, has been overwhelmingly successful.

Mr. John Marshall: Does my right hon. Friend agree that the leaders of West Germany realise that the Trident programme is the guarantee of their freedom and ours, and that if we were to abandon the nuclear deterrent we should be faced by the vast superiority of the Warsaw pact countries in conventional and chemical weapons? Will he promise to listen not to the harridans of Greenham Common, but to the common sense of the British people?

Mr. Younger: I agree with my hon. Friend. I have no doubt that the German Government and people will understand that their safety and security depend on the nuclear strategy of NATO.

Ms. Ruddock: I am sure that the Secretary of State is as aware as I am that the Soviets have an overwhelming superiority over the West in short-range nuclear weapons. Is it not a fact that the British Government are opposed to a negotiation between NATO and the USSR because it is most likely that Mr. Gorbachev would agree to removing all those short-range nuclear weapons, despite the fact that the Soviet Union has a great excess, and that the British Government are terrified of the denuclearisation fo Europe, which is what the people of Europe want?

Mr. Younger: The hon. Lady ignores the fact that this Government have been leading the search for fewer nuclear weapons and are the first Government ever to have achieved a reduction in nuclear weapons.
Germany would agree with us that the priorities are as I have set out. We are saying, not that other forms of nuclear weapons should not be negotiated away, but that the priority, for our safety, is chemical weapons and the

conventional imbalance. The hon. Lady should come to terms with the fact that the solution that she supports has failed dismally.

Mr. Summerson: Does my right hon. Friend agree that if there is a war on West German soil the aggressor is hardly likely to be either NATO or the West German Government?

Mr. Younger: My hon. Friend makes a good point. The question of conventional weapons must address the fact that the Warsaw pact forces are arraigned in an offensive posture and it is that which we must negotiate away as soon as we can.

Mr. Denzil Davies: I am sure the Secretary of State is aware that there is consensus in the Federal Republic, between Right and Left, that there should be parallel talks on the reduction and elimination of battlefield nuclear weapons, and on conventional arms reductions. If the talks on conventional reductions prosper, the talks on battlefield nuclear weapons can prosper. However, if they do not, there will not be any progress in the talks on battlefield nuclear weapons. Why are the Government so opposed to such a reasonable suggestion? What are they afraid of?

Mr. Younger: The right hon. Gentleman is putting words in the mouths of the Germans, who fully support NATO's nuclear strategy, which depends upon a flexible response being available in any possible nuclear attack. The NATO Alliance as a whole, including Germany, will have to make up its mind whether it agrees with the priorities that I have set out as the British Government's view. It will do that in the next few months.

Mr. Wallace: Last week the Prime Minister commented on the need to modernise nuclear weapons. That could have implications for the Federal Republic. Has the Prime Minister discussed that view with any representative of the German Government? Have any decisions yet been taken on modernising a British tactical nuclear weapon, or is that decision to await the decision of the NATO nuclear planning group?

Mr. Younger: No decisions of that kind have been taken. This matter predates the INF agreement. It is necessary that we keep our existing weapons systems up to date. Nobody can keep weapons systems without keeping them up to date. That is what the Montebello discussions were all about, and we shall have to reconsider that in the future to make sure that we never have outdated weapons.

Mr. Patrick Thompson: When responding to the Opposition, who use the West Germans to support their unilateralist cause, will my right hon. Friend remind the House of West Germany's record and of the fact that it was the West German Government and leaders who appealed to NATO to bring in the dual-track policy that brought about the installation of cruise weapons in the first place?

Mr. Younger: Yes. Opposition Members are being most unfair to West Germany, which is a strong advocate of NATO's strategy. I remind Opposition Members that all the NATO allies, without exception, support NATO's strategy of nuclear deterrence. Only the British Labour party is out of step in this matter.

Tucano Aircraft

Mr. Ted Garrett: To ask the Secretary of State for Defence if he will make a further statement on the introduction of Short's Tucano into RAF service.

Mr. Haynes: To ask the Secretary of State for Defence if he will make a further statement on the introduction of Short's Tucano into Royal Air Force service.

Mr. Sainsbury: The release-to-service trials programme is continuing at the Aeroplane and Armament Experimental Establishment, Boscombe Down, and should be completed within the next few months.

Mr. Garrett: Is the Minister still convinced that the design and engine power of these aircraft will be suitable and that when they are introduced at squadron level they will not prove expensive to maintain, and possibly, be failures? Is he really satisfied that there are not problems, other than armament problems, with these aircraft?

Mr. Sainsbury: I assure the hon. Gentleman that we still consider that the Tucano will meet the RAF's training needs satisfactorily. Therefore, there are obviously no plans to review our decision to purchase that plane. Nor do we expect it to be unduly expensive to operate.

Mr. Haynes: Can the Minister remember coming to the House and telling us that this aircraft was the bee's knees and that it was the aircraft that we needed to train our RAF personnel? Will he now stand at the Dispatch Box and say that that statement was a failure? You know, Mr. Speaker, some of the Ministers in this Administration are useless. If the Minister was a councillor and had wasted ratepayer's money in the way that he has wasted taxpayers' money, he would be disqualified.

Mr. Sainsbury: My memory does not go back quite as far as the hon. Gentleman's. I do not recall being at the Dispatch Box and using such an eloquent phrase as the "bee's knees". I assure the hon. Gentleman and the House that we have every confidence in the aeroplane. There is no cost penalty for the Ministry of Defence because of any delay, as there is a fixed-price contract and the aircraft are paid for when they are delivered.

Mr. Colvin: Will my hon. Friend confirm that because it is a fixed-price contract—130 aircraft for £125 million—the lateness in the delivery of the initial aircraft will not add one penny to the overall cost, and may even help his cash flow? It will not have any effect on the completion of the delivery.

Mr. Sainsbury: I am glad to confirm what my hon. Friend said. The late delivery does not add one penny to the overall cost. Throughout the delivery period we hope that there will be an acceleration that will enable us to catch up on some of the original delays.

Mr. Sayeed: How is the reciprocal trade agreement on Short's Tucano going?

Mr. Sainsbury: My hon. Friend may know that there is no offset arrangement with Brazil for the Tucano because some 90 per cent. of the value of the airframe is represented by work to be carried out in the United Kingdom, mainly by Short's. We have an offset agreement with the engine manufacturer, Garrett, and that is bringing significant benefits to United Kingdom industry.

Mr. Rogers: Why will the Minister not come clean and lay the facts before the House? The two Tucano prototypes that have been delivered and are undergoing tests have only flown for three quarters of an hour— [Interruption.] That information was given to me in answer to a written question in mid-January. Those prototypes have flown for only three quarters of an hour. At this time the RAF should have at least 24 such aircraft in service. I wonder whether the Minister is now considering hiring some PC9s from the Saudi Air Force, which has had its aircraft delivered, in quantity, already?
Will the Minister also come clean and tell the House that there is a cost to this country as a result of the late delivery of Tucanos? The price of the aircraft may stay the same, but there is a cost of at least £10 million every six months to keep the Jet Provosts flying.

Mr. Sainsbury: If the Jet Provost were not flying we should be flying the Tucano instead—there would be no cost in that. The hon. Gentleman has got those figures wrong, as he has the others. I hope, he will appreciate that the RAF has, correctly, extremely high standards, especially for training aircraft. There have been delays to ensure that those standards are satisfied. So far, the five production aircraft have achieved a total of 180 flying hours.

Mr. Bill Walker: Does my hon. Friend agree that the Tucano, with its new upgraded engine, the strengthened wing spar against bird strikes and improved undercarriage, is a different aeroplane from the Tucano that was first looked at? When the new Tucano comes into service it will be capable of doing exactly what the RAF requires.

Mr. Sainsbury: I am glad to confirm what my hon. Friend says. The RAF has every confidence that the Tucano will meet requirements and specifications.

Rev. Martyn Smyth: Will the Minister confirm that not only has Short's an excellent reputation for a sturdy plane, but that, time and again, the world has turned to Short's to satisfy its needs, as the Queen's prize for exports has testified year after year?

Mr. Sainsbury: The hon. Gentleman will know that Short's has a long and proud history of providing defence equipment, and I hope that it will continue to maintain that record.

Jet Provost Aircraft

Mr. O'Brien: To ask the Secretary of State for Defence what is the current cost of maintaining the Jet Provost planes in operation.

Mr. Ian Stewart: About £65,000 per aircraft per year.

Mr. O'Brien: Is not the Minister's reply shameful, given that our pilots are training in antique planes, when the Minister promised the House that the Tucano aircraft would be in operation by this time? The Government have failed the country yet again on this issue. Is the Minister not ashamed to come to the Dispatch Box and say that the new planes are not being introduced and are costing the taxpayer a great deal of money? As my hon. Friend said, if the Minister had been a councillor and shown the same attitude, he would have been disqualified from holding office.

Mr. Stewart: I am sorry that both the hon. Gentleman and I have had part of the ground cut away from under


our feet by the answers to the previous question. I repeat what my hon. Friend the Under-Secretary of State for Defence Procurement said. There is no extra cost to the Ministry of Defence budget through running on the Jet Provosts because, in the meantime, the Ministry of Defence does not have to find the up-front money for the Tucano. The Jet Provost is more expensive to run than the Tucano and it consumes more fuel, but, until such time as the Ministry of Defence has to pay for the Tucanos, the net effect of this is not to add any extra cost to the Ministry of Defence budget.

Mr. Bellingham: Will the Minister consider carefully the regulations governing the use of aircraft as demonstrators? Is he aware that yesterday a con man, purporting to represent the Sultan of Brunei, persuaded the Royal Air Force to fly up to Norwich airport a BA146 of the Queen's Flight for a full demonstration, involving a free flight and a full briefing of all the sensitive equipment in the aircraft? Will he tell the House why the RAF did not check that person's credentials? Does he agree that a full explanation is required?

Mr. Stewart: I agree with my hon. Friend that a full explanation is required, and I understand that the person concerned is helping the police with their inquiries.

Mr. Ron Brown: Given the Minister's statement, is it not also opportune to pay compensation to Sergeant Jarvey of the King's Own Scottish Borderers, who is linked with that project, and therefore compensate him in a small way for all the stupidity and nonsense that we heard from the brass hats in Berlin about his alleged misconduct? Is it not time that something was done to make amends to Sergeant Jarvey? Does the Minister remember the case?

Mr. Stewart: I do not know whether the person concerned was flying a Jet Provost at the time, but I find it difficult to relate the hon. Gentleman's remarks to what we have been discussing.

West German Defence Minister

Mr. Anthony Coombs: To ask the Secretary of State for Defence when he last met his West German counterpart; and what matters were discussed.

Mr. Younger: I last met Dr. Woerner on 20 January, when we discussed matters of mutual interest.

Mr. Coombs: Will my right hon. Friend confirm that it is both his view and that of Chancellor Kohl, as set out in a speech in Munich on 2 February, that, until further progress has been made on the reduction in conventional forces and the elimination of chemical weapons, the denuclearisation of Europe is not an option? Will he also confirm that, in the meantime, the upgrading and modernisation of nuclear and short-term weapons, which have not been included in the INF agreement, are vital to European security?

Mr. Younger: I understand that, as my hon. Friend says, those are roughly the views of Chancellor Kohl and of the West German Government. Certainly, all the NATO allies are agreed that our weapons systems must be kept up to date.

Mr. Conway: When my right hon. Friend met his counterpart, did he have an opportunity to express the value that we attach to the kindness and hospitality of the

West German people when our troops are on exercises in West Germany fulfilling their NATO function? Will there be more exchanges of home-based forces, particularly territorial forces, with the British Army of the Rhine, to take part in mutual exercises?

Mr. Younger: Dr. Woerner and I have discussed these matters on many occasions. I have no doubt that he and the German Government are extremely grateful for the presence of British forces in Germany. We are grateful for the training facilities with which they are able to help us.

Mr. McFall: When the right hon. Gentleman meets his West German counterpart, will he discuss with him the incident at Faslane on HMS Resolution on 26 January in my constituency, which was described by the Ministry of Defence as a minor electrical malfunction? The Ministry of Defence did not give a sufficiently robust rebuttal of what happened, so my constituents—

Mr. Speaker: Order. It is difficult to relate this to the question.

Mr. McFall: It is related because of the interest of the European Community in the incident. [Interruption.]

Mr. Speaker: Order. I cannot hear whether the question is relevant or not.

Mr. McFall: Many European reporters contacted me about the matter.
Will the Secretary of State ensure that if there is no substance to the reports, the Ministry of Defence will deny them robustly and communicate that to the local community so that unfounded fears can be laid to rest?

Mr. Younger: I do not think that it will be necessary for me to raise this with Dr. Woerner, because I would only have to tell him that there was a small electrical malfunction. At no point was there any danger to anyone on board or in the neighbourhood. I am sure the hon. Gentleman will be glad to retail that in full detail to his constituents, who have nothing to fear.

Mr. Jack: Did my right hon. Friend discuss the European fighter aircraft with Dr. Woerner? If so, what did he say?

Mr. Younger: Yes, my hon. Friend has guessed correctly. We discussed the European fighter aircraft and Dr. Woerner expressed himself and his Government as being determined to press on with it and—I agreed with him about this—to try to reduce its price. I am glad to say that good progress has been made and I hope that the partners will be able to get together before long to agree the next stage.

Mr. Denzil Davies: The Secretary of State has still not given the House a rational explanation of why the Government are so opposed to parallel talks on conventional arms reductions and battlefield nuclear weapons. As we have constantly been told that NATO must have battlefield weapons because of the large concentrations of Soviet armour, and as conventional talks will be about reducing those, why not have parallel talks on battlefield nuclear weapons, especially as the Soviet Union and the Warsaw pact have some superiority in nuclear artillery and a large superiority in short-range nuclear missiles?

Mr. Younger: I am grateful to the right hon. Gentleman, who has made my point for me. If what he


said meant anything, it meant that it would be infinitely wiser to go for conventional reductions first to establish whether the tank concentrations that he talked about can be reduced.

Mr. Brazier: Does my right hon. Friend agree that, were there to be significant reductions in conventional Soviet forces, and were they to be pulled back behind the Urals, because of the much greater reinforcement distances across the Atlantic for American reinforcements there would still be the potential for an imbalance to reassert itself quickly? That is why it will always be essential that we have battlefield nuclear weapons.

Mr. Younger: My hon. Friend is right. The whole reinforcement capability will have to be taken into account in the conventional talks. The House should be in no doubt, and should not forget, that we are having this discussion in the context of the first major progress in arms reduction, which was a product of the policy that the Government have been following.

Nuclear Strategy

Mr. Redmond: To ask the Secretary of State for Defence what recent representations he has received from the French Government regarding nuclear strategy.

Mr. Ronnie Campbell: To ask the Secretary of State for Defence what recent representations he has received from the French Government regarding nuclear strategy.

Mr. Younger: We maintain a fruitful dialogue with the French Government on a wide range of defence matters of mutual interest, including nuclear matters.

Mr. Redmond: Will the right hon. Gentleman explain the Government's attitude to the fact that, because the Franco-German defence council and brigade remain outside of NATO, and because of the Prime Minister's total reliance on the USA, there is a danger of a serious military split occurring?

Mr. Younger: I do not think that the hon. Gentleman need fear such a split. We take the view that the Franco-German brigade is a welcome development, especially as none of the troops for it will be taken from troops that are already committed to NATO. It is therefore a bilateral development outwith NATO, which can only help the strength of the West.

Mr. Campbell: What is the Government's attitude to the new Franco-German defence council and brigade outside NATO?—[Interruption.] Given the fact that the Prime Minister is wholly relying on the United States, will there not be a military split?

Mr. Younger: With respect to the hon. Member, I think that that is the question asked by the hon. Member for Don Valley (Mr. Redmond), which I answered a moment ago.

Mr. Nicholas Bennett: Does my right hon. Friend agree that the robust, independent pro-nuclear policy of the former Socialist Government and Socialist President of West Germany has much to commend it to the Labour party?

Mr. Younger: My hon. Friend is correct. I only wish that the previous Socialist Governments of West Germany could give a teach-in to the Labour party about sensible defence policies.

Mr. William Powell: Does my right hon. Friend agree that one of the most helpful developments in European policy and strategy is the increasing willingness of France to engage in manoeuvres with her allies in NATO? Will my right hon. Friend do all that he can to ensure that France carries out manoeuvres, not only with West Germany, but with ourselves?

Mr. Younger: I very much welcome the extremely good defence relationship that we have with France at present. It is helpful not only in joint manoeuvres—which are developing quite satisfactorily—but in joint procurement policies, which also have great promise for the future.

Mr. O'Niell: Further to that point, does the Secretary of State agree that it is about time that the French paid their full dues to Europe and became, once again, full members of NATO and stopped trying to have their cake and eat it?

Mr. Younger: As the hon. Gentleman knows, I hope that the time will come when the French will feel able to come into the military structure of NATO. At the present time we are happy to develop warmer and closer relations with France, and I believe that that is happening now.

Mr. Curry: Is my right hon. Friend aware that President Mitterrand of France is to attend the forthcoming NATO summit, which will be the first time that a French Head of State has attended it for more than 20 years? Does he think that that is a positive sign for the increasing integration of France, in practice, into the defence of Western Europe?

Mr. Younger: Yes, I think that the presence of the French Government, at presidential level, is a good augury for a successful NATO summit, which I hope will produce a clear and strong declaration.

Dual-Capable Aircraft

Mr. Harry Barnes: To ask the Secretary for State for Defence how many aircraft types there are in the Royal Air Force currently classified as dual-capable.

Mr. Ian Stewart: Three, Sir.

Mr. Barnes: Is there any intention to include the three dual-capable aircraft, which are capable of nuclear use, in conventional—[Interruption.]

Mr. Speaker: Order. It is very difficult to hear at this end of the Chamber.

Mr. Barnes: Is there any intention to include those three aircraft in the Geneva conventional arms talks, or is it the Government's intention never to introduce discussions about nuclear capability into negotiations?

Mr. Stewart: We do not believe that nuclear systems should be included in conventional arms talks.

Mr. Bill Walker: Does my hon. Friend agree that dual capability for the RAF is not new? It goes back to the introduction of the Victor, Vulcan and Valiant in the early 1950s. Therefore, the RAF is simply maintaining the capacity that it has had over all those years.

Mr. Stewart: My hon Friend is right. There is a long history of dual-capable systems for aeroplanes. As to the negotiations on arms control, which the hon. Member for Derbyshire, North-East (Mr. Barnes) raised, we believe


that conventional talks should concentrate on conventional forces. The priority in that regard is the great advantage and numerical superiority that Warsaw pact forces have in conventional ground forces.

Mr. Duffy: Will the Minister tell the House when those RAF aircraft will benefit from the protection and security of a NATO identification friend or foe system, for which we have been waiting for years?

Mr. Stewart: As the hon. Member knows, we have studied the systems for a long time. We are always anxious to update IFF and other systems, and I have no doubt that those aeroplanes will benefit from that.

Mr. Rogers: Will the Minister simply give a straight answer: will the three dual-capable Tornados be included in any conventional arms talks?

Mr. Stewart: We have said that we would not expect nuclear capability to be included in conventional arms talks. We have not said that dual-capable aircraft or other systems should be excluded in so far as that applies to their conventional role.

Oral Answers to Questions — PRIME MINISTER

Engagements

Mr. Dykes: To ask the Prime Minister if she will list her official engagements for Tuesday 23 February.

The Prime Minister (Mrs. Margaret Thatcher): This morning I had meetings with ministerial colleagues and others. In addition to my duties in the House I shall be having further meetings later today. This evening I hope to have an audience of Her Majesty The Queen.

Mr. Dykes: As this is such a crucial moment, will my right hon. Friend today and in coming weeks continue her determined and much appreciated efforts to secure an international peace conference and a lasting settlement in the middle east, bearing in mind that this must be done without preconditions on either side, that the credibility of the United States is inevitably reduced by its historic and strategic closeness to one party to the dispute, and that Europe and the United Kingdom have a unique role to play in this process?

The Prime Minister: As my hon. Friend knows, our policy has not changed, over the past year in particular, when we have espoused the cause of an international conference as a background for direct negotiations between King Hussein and the Palestinians and Israel. It has not been possible to get that going because it has not met with a sufficient degree of support from Mr. Shamir. We shall continue to espouse that course because we think it is the best one. The other side of the problem arises as to who shall negotiate on behalf of the Palestinians, but I believe that that particular part is soluble.

Mr. Kinnock: First, I warmly welcome the reply that the Prime Minister gave on the international conference.
Does the Prime Minister recognise that her refusal to give a commitment fully to fund the Health Service pay award is, in the words of the Treasury and Civil Service Select Committee, causing "damaging uncertainty" and in some areas continued ward closures. Will she now make the necessary commitment to funding so that health authorities can plan and provide properly without cutting staff and without closing wards?

The Prime Minister: No, Mr. Speaker. This is about the fifth time that I have had the same question, so the answer will be precisely the same. The pay award will be dealt with in precisely the same way as previous awards, and of course previous awards have been highly beneficial to the nurses. I did look up to see precisely the dates upon which we dealt with it last year. All the reports of the review bodies came in between 1 and 14 April. We like to deal with them altogether. The nurses, doctors, dentists, the profession supplementary to medicine, the armed forces and the top salaries pay review bodies' reports all came in within a fortnight and we announced all our decisions by 23 April. I hope that if the reports come in in a similar group this year we will be equally expeditious in announcing our decision.

Mr. Kinnock: The Prime Minister says that she has made the commitment before, but never before have we had a Select Committee with a majority of her hon. Friends saying publicly that the absence of a commitment is causing "damaging uncertainty", and never before have we had the same Select Committee saying that the Prime Minister has up to £2 billion extra that she could spend on the National Health Service without changing the proportion of GDP spent on the service. When that service has such desperate and immediate need today, and when she plainly has the money, why does she not use the money?

The Prime Minister: My right hon. Friend the Chief Secretary gave a very effective reply to the Select Committee. With regard to GDP, the right hon. Gentleman will be aware that not only has GDP gone up—there is further good news on that today; it is up 5 per cent. on what it was a year ago—but the proportion of unincreased GDP spent on the Health Service has gone up from 4·8 per cent. under Labour to 5·6 per cent under the Government.

Mr. Kinnock: The Prime Minister quotes her right hon. Friend. In response to him, her right hon. Friend the Member for Woking (Mr. Onslow) said that coded messages were not enough and that his reply was not good enough. Today, now, wards are being closed and uncertainty is causing damage because the right hon. Lady will not make a commitment. Why does she not make a commitment and relieve the health authorities of further weeks of uncertainty, causing further damage to the Health Service?

The Prime Minister: The nurses have had great action under Tory Governments, and have had pay increases of 30 per cent. over and above inflation, compared with a 20 per cent. reduction under Labour. The nurses have done very well under Tory Governments, and I shall deal with the report as I have indicated.

Mr. Knapman: Does my right hon. Friend agree that vast sums of public money have been given to the Rover car company and that further sums of money should not be given to that company to fund excessive pay demands?

The Prime Minister: My hon. Friend is correct. During the lifetime of this Government about £2·9 billion has been given to the Rover-Leyland group. There is no intention of providing any more money specifically to fund the demand for an increase greater than that which the management has decided to offer. It is for the management and the work force to resolve the strike. I hope that it will


not last long, because strikes do not help anyone, least of all those who work in a particular company. My fear is that that would be handing jobs and business to Japan.

Mr. Matthew Taylor: I am pleased that the Prime Minister is a regular visitor to Cornwall, but is she aware that in so doing she and many others are adding to the burden on the Health Service in Cornwall? Roads are congested and ambulances are less able to move around the county as hospital closures increase. Will the Prime Minister—[Interruption.]

Mr. Speaker: Order. The hon. Gentleman must ask a question, please.

Mr. Taylor: Will the Prime Minister ensure, within the review of the Health Service, that a new commitment is made to tackle the problem of rural scatter in areas such as my constituency?

The Prime Minister: We shall have a very thorough review of the Health Service, taking into account many representations. If the hon. Member has specific and rather more definite representations to make, perhaps he will let me have them in writing.

Mr. Colvin: When does my right hon. Friend expect the flotation of the National Freight Corporation, a business that was previously owned by the state and is now owned by its workers? Are not the privatisation and flotation further examples of the transfer of wealth in favour of working people and their families?

The Prime Minister: I very much welcome the progress that the National Freight Corporation has made since it was privatised by a management buy-out. It has done very well by its work force, and the work force has done very well by the National Freight Corporation. Profits have increased by about nine times since privatisation, and those who helped with the buy-out have had a very good deal. I wish the company well for the flotation.

Engagements

Mr. Mullin: To ask the Prime Minister if she will list her official engagements for Tuesday 23 February.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Mullin: Does the Prime Minister agree with Lord Denning that it is better to have one or two innocent people remain in gaol than to risk undermining the credibility of the legal system by having to own up to a mistake? [Interruption.] Does she further agree that nothing discredits our system of justice so much as the widespread notion that some mistakes are too big to own up to?

The Prime Minister: The hon. Gentleman asked me to agree with a proposition by Lord Denning. I would prefer to see the proposition in context. I understand that the hon. Member may be referring once again to the recent hearing by the Court of Appeal of the case of the Birmingham pub bombings. The Court of Appeal hearing fully examined the defence case and decided that the convictions were sound. The Court of Appeal has certified that there is a point of public importance. I understand that the appellants intend to apply to the House of Lords to pursue the matter. The judgment, of course, is fully available to those who wish to read it in detail.

Mr. Favell: Has my right hon. Friend had time today to consider the Japanese ambassador's comment that if there were a business Olympics we would win gold medals? What kind of medals would we win if the Opposition were in charge?

The Prime Minister: I saw the most excellent comment by the Japanese ambassador. I think that he and Japan are very pleased with the inward investment that they have had into this country. They have insisted on one union only with which to negotiate. The companies have done well and the work force has done well. They have done well for Britain and we are very pleased with the compliments of the Japanese ambassador on our excellent, enterprising industry.

Mr. Strang: To ask the Prime Minister if she will list her official engagements for Tuesday 23 February.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Strang: Will the Prime Minister acknowledge the fundamental importance to the Scottish economy of the coal and steel industries? Is she aware of the widespread concern that thousands of jobs which depend upon these industries are threatened by privatisation? Will she take steps to direct British Steel to invest in new facilities in Scotland? Will she put an end to the suggested economic lunacy of a privatised South of Scotland Electricity Board being allowed to close pits by importing foreign coal?

The Prime Minister: The hon. Gentleman has, not unexpectedly, asked two questions, one about steel and one about coal. As to steel, it is the subject of a debate later. The hon. Gentleman is aware that undertakings, subject to commercial considerations, were given to Ravenscraig with respect to steelmaking for the next seven years and to the Associated Dalzell plant for plate-rolling. It was, I think, an undertaking for the longest production of almost any steel plant in Europe. I thought that that went down extremely well in Scotland. We hope to undertake the privatisation of electricity, including Scottish electricity, during the lifetime of this Parliament. There will, I hope, be a White Paper out soon about our proposal.
I understand that the hon. Gentleman was asking a third question about coal, in connection with the ending of the coal contract, which I believe is due to terminate at the end of March—[HON. MEMBERS: "No."] My right hon. and learned Friend the Secretary of State for Scotland is aware that the existing arrangements between the South of Scotland Electricity Board and British Coal are due to terminate at the end of March. [HON. MEMBERS: "No."] If they are not, there is no problem.

Mr. Stanbrook: When my right hon. Friend signed the Anglo-Irish Agreement, did she expect that the Irish Government would use it to justify a unilateral inquiry into an incident that occurred within the United Kingdom, to restrict the extradition of alleged terrorists from Ireland, to set aside a decision of the Attorney-General and to attempt to reverse the verdict of the British Court of Appeal?

The Prime Minister: I do not think that it is right or possible to use the Anglo-Irish Agreement for that purpose, if one looks at the terms of the agreement. With regard to the inquiry which the Republic of Ireland has recently indicated that it has set up, of course, in their own


country the Irish Government can inquire into anything they wish, but not in matters north of the border. I have taken note of what my Friend has said about the extradition arrangements which we had with them and which were changed unilaterally. I have nothing to add to the excellent statement which my right hon. and learned Friend the Attorney-General made in the House on other matters.

Mr. Smith: To ask the Prime Minister if she will list her official engagements for Tuesday 23 February.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Smith: Further to the question that was asked earlier by my right hon. Friend the Leader of the Opposition, was the Prime Minister denying the report that appeared in today's Daily Telegraph that Ministers have already decided not fully to fund the nurses' pay review, but instead to seek further efficiency savings? If she is not denying those reports, when will she realise that for her to suggest that nurses' pay should be funded only at

the expense of patient care would be beyond contempt and rejected decisively by this House, as it has been by the Select Committee on Social Services, and as it will be by the people of this country?

The Prime Minister: I have not read any newspapers today. [HON. MEMBERS: "Oh."] I have been far too busy. What appears in those newspapers is not my responsibility. We shall deal with the report of the review bodies in precisely the same way and with precisely the same expedition as we dealt with them in previous years, and in particular last year. The hon. Gentleman will not have long to wait.

Mr. Strang: On a point of order, Mr. Speaker.

Mr. Speaker: Order. I shall take points of order after the statement.

Mr. Strang: I have a point of order arising out of Prime Minister's questions, Mr. Speaker.

Mr. Speaker: Order. I know that the hon. Gentleman wishes to raise a matter, but I shall still take points of order after the statement.

Britoil

The Chancellor of the Exchequer (Mr. Nigel Lawson): With permission, Mr. Speaker, I wish to make a statement.
On 1 February I told the House that, following the acquisition by BP of the majority of Britoil's ordinary shares, the Government would discuss with the two companies how we would use the special share. I reaffirmed that the powers of the special share would be used for so long as it was in the national interest to do so. I undertook that, in the discussions, we would take fully into account what was best for Scotland and for the development of the North sea. Those discussions have now been completed, and an acceptable arrangement has been reached with BP. The details are set out in an exchange of letters between BP and the Treasury, and I am placing copies in the Library of the House.
I shall deal first with the undertakings BP has given about its management of Britoil's North sea assets on the United Kingdom continental shelf. BP will seek to achieve an increase of at least 5 per cent. in recoverable reserves from Britoil's North sea oilfields. It has also undertaken to increase exploration substantially. By 1990, BP plans to spend between £300 million and £325 million a year on combined BP and Britoil North sea exploration. This represents a large increase in expenditure, and will lead to a major expansion in the number of wells drilled. BP has undertaken to develop as fast as is practicable all economic North sea discoveries in the combined BP and Britoil portfolio, including those resulting from the increased exploration programme.
All this implies a faster and more effective development of assets in the North sea. This increase in activity should give a welcome boost to the United Kingdom offshore industry.
So far as Scotland is concerned, BP has undertaken that Britoil's Glasgow office will become the business headquarters for the management not only of BP's and Britoil's combined United Kingdom upstream assets but also of BP's Norwegian and Irish interests, and that the overall number of employees in Aberdeen and Glasgow will not fall as a result of the acquisition.
BP has also undertaken to transfer to Glasgow the management of a high technology research and development project for the exploitation of the deeper waters of the United Kingdom continental shelf and elsewhere. As a minimum, between 50 and 75 senior BP executives and other highly qualified technical graduate staff will move to Scotland.
BP expects to increase the existing commitments of both companies in support of United Kingdom continental shelf-related research at Scottish universities. In addition, the company will endow a number of BP research fellowships for postgraduate research in Scottish universities. Both BP and Britoil have an excellent reputation for support for the Scottish community, and BP has undertaken that that will be continued at at least the present levels for the two companies.
The board of Britoil will be headed by a new non-executive chairman without any previous BP connections, whose appointment will be agreed between the Government and BP. Of the rest of the board, the chief executive and the executive directors will be nominated by

BP, but the appointment of a majority of the non-executive directors will be agreed between the Government and BP.
If BP, which currently owns some 80 per cent. of Britoil's ordinary shares, ends up with a majority, but not a 100 per cent. shareholding, the same assurances and arrangements will apply, to the extent consistent with the obligations owed to Britoil's minority shareholders. Britoil will then be managed and operated as a separate, independent subsidiary and will have its own chief executive. The proposed staff movements to Scotland will still take place.
The Government have told BP that in return for these assurances, and so long as we are satisfied that BP is complying with them, we do not intend to exercise any of the rights attaching to the special share. After a period of time the Government will review, in the light of the way that these assurances have operated, when the special share should be redeemed. Meanwhile, responsibility for the special share will be transferred from the Treasury to the Department of Energy.
The existence of the special share has enabled the Government to secure from BP these wide-ranging, valuable and public assurances. BP has a high reputation, both internationally and also as a major employer in Scotland, and I am sure that the House will share my confidence that it will honour the assurances it has given.
I believe that this outcome is good for Scotland, good for the efficient exploitation of our North sea assets, and good for the future of the two companies and of their employees.

Mr. John Smith: I hope that the Chancellor does not expect the House of Commons to accept that this pathetic exercise in window dressing is an honouring of the specific pledges about the independence of Britoil that he gave when he was Secretary of State for Energy while assuring us of the magical properties of the golden share. Let me remind the Chancellor of what he said to the House when he was Secretary of State for Energy. He said that the special share
will act as the most formidable deterrent to anyone who tries to take over control of the board, of the company or of the majority of its shares, and who the Government consider to be unacceptable."— [Official Report, 31 March 1982; Vol. 21, c. 334.]
Does the Chancellor also recollect that the then Minister of State for Scotland, now Lord Gray of Contin, said:
The articles will contain effective safeguards for Britoil's independence and the safeguards will be triggered if there is an attempt to take over voting control of the company or to control the Britoil board or its composition."— [Official Report, 1 April 1982; Vol.21, c.450.]
Is it not right to say that BP correctly judged that the Government would not stand by their own assurances and has now rolled over the Chancellor of the Exchequer?
In exchange for the obliteration of the independence of Scotland's largest publicly quoted company there is an undertaking that jobs will not fall, although there is no guarantee for the future, 50 to 75 executives will move with the research project, which should have been in Scotland in the first place, and the Scottish universities will get a few extra research fellows.
Is it not crystal clear that the Chancellor exacted precious little from BP in exchange for handing Britoil to


it on a plate? Is it not typical of the muddle of public relations and doublespeak with which this statement is riddled that Britoil
is to be managed as a separate, independent subsidiary"?
Does not the Chancellor understand that a subsidiary has ceased to be independent? Was it not the independence of Britoil that the golden share was supposed to guarantee? Is it not significant that BP has sole and unfettered control over the appointment of the chief executive and all the executive directors of the new subsidiary?
Having failed to use the powers of the golden share, the Chancellor is now signalling its end, and even in its limbo period it is so worthless that the Treasury is tossing it over to the Department of Energy.
Does not this whole episode prove that the Chancellor is not to be trusted when he gives assurances to Parliament? The result of the whole exercise is the betrayal of the public interest exemplified by an increase in monopoly power, a move of decision-making power to London and the extinction of a proud and successful oil company.
Will the Chancellor reflect on the irony that, while he allows BP to gobble up Britoil, the Kuwaiti Investment Office is steadily increasing its shareholding in BP—the pathway opened to the Kuwaitis by the Chancellor's decision to persist in selling the Government's share after the crash? Do not the Kuwaitis have a clearer concept of their national interest than the Chancellor has of the British interest?

Mr. Lawson: I am not at all surprised that the right hon. and learned Gentleman got on to the subject of the Kuwaiti holding in BP, because he knew that he was on such flimsy and hopeless ground on the issue about which I made my statement. He also knows of the assurances that we have received from the Kuwaiti Government on the Kuwaiti holding.
I am sorry that the right hon. and learned Gentleman should have decided to imply that BP was such an unacceptable owner of Britoil, as I well recall an earlier occasion—over the BP share issue—when he lauded the merits of BP to the skies. He seems to have changed his tune to a remarkable extent. Also, the right hon. and learned Gentleman has not read the statement very carefully, although he had a long time to do so. The reference to the separate independent subsidiary was in the case where BP did not secure 100 per cent. of the shares and therefore there was a minority outstanding. Therefore, that is an accurate statement in company law. If, however, BP gets 100 per cent., Britoil will not be independent but it will still he subject to the assurances that BP has given. They are substantial assurances and the right hon. and learned Gentleman is wholly wrong to brush them aside. His views will not be shared by anyone who knows anything about the oil industry in general and the Scottish offshore oil industry in particular.
Finally, I would refer the right hon. and learned Gentleman to the statement that I made more than five years ago as Secretary of State for Energy which he quoted. I said that the special share would be a deterrent to the takeover of Britoil by anyone who the Government considered to be unacceptable. The Government have found that a takeover by BP, subject to the assurances that BP has given, is thoroughly acceptable and in the best interests of the British people and the British economy.

Mr. Alick Buchanan-Smith: Will my right hon. Friend acknowledge that there has been a direct challenge from BP to the Government? In those circumstances, my right hon. Friend is placed in extreme difficulty. This is indeed a sad day for the independence of Britoil and of the British oil sector. Having said that, will my right hon. Friend accept that the assurances that he has obtained from BP in these difficult circumstances are very much to be welcomed? Will he ensure —particularly in the future interests of Britoil's staff—that there is no backsliding and that BP fulfils to the letter the undertakings that have been given?

Mr. Lawson: I thank my right hon. Friend for his remarks. I am quite sure that there will be no backsliding by BP. BP has given solemn assurances to me and, through me, to the House of Commons. But of—[Interruption.]

Mr. Speaker: Order. It is very difficult to hear what the Chancellor is saying when there is so much background noise from a sedentary position.

Mr. Lawson: But of course it is important that the House should be assured that the undertakings that BP has given will be carried out, and that is why we shall be retaining the special share, with all its powers, until such time as these assurances and undertakings have been fully implemented and have been seen to be working satisfactorily for a reasonable period.

Several Hon. Members: rose—

Mr. Speaker: Sir Hector Monro. [HON. MEMBERS: "Oh!"] I will balance up in a minute.

Sir Hector Monro: Does my right hon. Friend accept that most thinking Scots will welcome a company such as BP with an international reputation developing its operational and administrative role in Scotland? Has my right hon. Friend discussed with BP the likely employment figures over the next two or three years?

Mr. Lawson: I am grateful to my hon. Friend. The employment figures will obviously depend on the success of the exploration programme and the success of the North sea oil industry based in Scotland, but I have no doubt that the arrangements that we have secured will benefit the North sea oil industry in Scotland. It is interesting that the total amount that BP expects to spend on exploration in the UKCS by 1990 of between £300 million and £325 million compares with a total for BP arid Britoil this year of around £200 million.

Mr. Dick Douglas: Will the Chancellor enlighten us a little on one of the conditions that BP seems to find acceptable — the 5 per cent. increase in the return on recoverable reserves? What timespan does the Chancellor seek to put on that evaluation? Will he or the Department of Energy continue to hold the golden share in order to ascertain whether this is a mere promise on the part of BP, or a promise that looks at the value of a field over, say, 20 to 25 years? How will the Chancellor or the Department of Energy seek to monitor that, or has he, in reality, sold out on a whole range of conditions to an oil company that knows what it is doing when he does not?

Mr. Lawson: The way in which BP conducts itself when it has secured Britoil and its operations in the North sea will be carefully monitored by the Department of Energy,


which is one of the reasons why it seemed to me appropriate that the special share should be transferred to the Department of Energy.

Mr. Malcolm Bruce: Will the Chancellor acknowledge that his statement to the House this afternoon is a shameful climb-down on the merit of the golden share? Why was not the takeover of Britain's largest independent oil company by Britain's largest oil company referred to the Monopolies and Mergers Commission? Does not the takeover show the Government's complete lack of understanding on the role that can be played by independent oil companies as opposed to multi-nationals? Will the net effect in Scotland outweigh the fact that BP is now transferring 300 people from Aberdeen to London, and will the transfers to Glasgow be from south of the border or from Aberdeen?

Mr. Lawson: Whether the arrangements should have been referred to the Monopolies and Mergers Commission is a matter for the Director General of Fair Trading and for my right hon. Friend the Secretary of State for Trade and Industry, not for me. The enhanced activity of the combined British Petroleum and Britoil group will mean great benefits for Scotland. The special share has ensured the independence of Britoil for over five years. It has ensured there has been no foreign acquisition of Britoil and it has ensured that BP has given the important undertakings that it has.

Mr. Tim Smith: Will my right hon. Friend confirm that the original object of the special share was to ensure that Britoil remained a British company? What could be more British and more acceptable than for Britoil to be acquired by BP?

Mr. Lawson: My hon. Friend makes a good point. It is deplorable that the Opposition seem to have nothing good to say about BP, Britain's largest company. One might have expected that sort of thing from Members of the Scottish National party, if there are any around; I would not have expected it from Members of other parties who believe in the union.

Mr. Harry Ewing: Will the Chancellor answer a simple question by telling the House what contingency arrangements he has in case BP fails to honour the undertakings that he has given the House today? Is it possible that BP will be divested of its share interest in Britoil if it fails to honour the undertakings which it has given the Chancellor and which he in turn has given the House?
As for BP's employment record, does the Chancellor realise that he simply does not know what he is talking about? As a Scottish Member in whose constituency BP has been throughout my parliamentary life, I know that it has the most appalling employment record of any company in my constituency. I do not regard the undertakings that BP has given the Chancellor as being worth the paper on which they are written.

Mr. Lawson: I find it difficult to contemplate that a company such as BP would give such undertakings to me, and through me to the House, and then break them. If, however, BP did not live up to those assurances, the

Government would have full power to use the special share to remove the entire board of Britoil, and to replace it with another board.

Mr. Michael Fallon: Does my right hon. Friend accept that, if the Opposition have no interest in the jobs in Scotland, we would be happy to have them in the north-east and receive similar assurances there? Does he not agree that, if the Opposition cannot attach any value to the concept of a tartan share, it is probably high time that it was redeemed?

Mr. Lawson: I note what my hon. Friend has said. He is always a powerful advocate for the north-east of England.

Mr. Tam Dalyell: What exactly has BP given in the way of undertakings? Will the Chancellor look at the small print? For example, paragraph 7 of his statement tells us:
BP expects to increase the existing commitments of both companies in support of UK continental shelf-related research at Scottish universities.
BP only "expects" to do that. Where are the undertakings? If BP cannot agree to that, what can we expect from it?
If we look at the statement carefully, we see that BP has not given the undertakings that the Chancellor is trying to give the impression it has given. What is meant by "expect"? Why could not even that be a definite undertaking?

Mr. Lawson: What is meant is that the hon. Gentleman can expect BP to live up to its undertakings. If he wants to look at the small print, however, I suggest that he looks not merely at my statement—which is perhaps the large print—but at the letter written by BP, which I have placed in the Library of the House and which runs to no fewer than 32 paragraphs.

Sir Ian Lloyd: Will not the public in general, and the Scottish public in particular, be much more impressed by my right hon. Friend's announcement about the increased development in the North sea, and the intensification of research and development in Scotland, than by the accustomed sterile preoccupations of the Opposition with which shares reside in which strong box? Can my right hon. Friend tell us whether this represents any change in the Government's policy towards the independent sector?

Mr. Lawson: I am grateful to my hon. Friend for what he has said. There is no change in the Government's policy towards the independent sector of the North sea, but that is not a matter for me; it is a matter for my right hon. Friend the Secretary of State for Energy.

Mr. Alex Salmond: Is the Chancellor aware that the exploration figures that have so excited him in relation to BP's projected expenditure in 1990 are less than the combined exploration expenditure of BP and Britoil in 1985? Are we not moving backwards, and are not those figures almost certainly less than they would be if the two companies remained independent?
Is it not the case that, if BP reaches 90 per cent. of the shareholding, the rest of the small shareholders will be forced to sell out? Are there any guarantees for jobs, given that BP plans to expand its job control from Dyce by 1,000 according to its own devices, and that to maintain employment could still conceal a rationalisation of Britoil jobs?
Does not the Chancellor remember telling the House that it is
important to protect the character of Britoil as an independent company, responsible for its own management and business strategy"?—[Official Report, 31 March 1982; Vol. 21, c. 334.]
Has that been done, and, if not, why not?

Mr. Lawson: On the specific undertakings given by BP, I ask the hon. Gentleman to look at the letter that I have placed in the Library of the House which goes into that in considerable detail, and which I summarised in my statement to the House a little earlier.
As for exploration levels in 1985 and now, I shall let the hon. Gentleman into a secret. At the beginning of 1986, there was a complete collapse of the world oil price, which led to a dramatic fall in exploration world-wide and not merely in the North sea. Therefore, the comparison is between what is promised by BP and what is happening now. As I have said, BP's best estimate of the total amount of expenditure in the North sea by BP and Britoil combined this year is about £200 million whereas the undertaking for 1990 is for expenditure of between £300 million and £325 million. That is a substantial increase.

Mr. Allan Stewart: Further to his answer to my hon. Friend the Member for Dumfries (Sir H. Monro), does my right hon. Friend agree that, although the number of jobs is, of course, important, the quality of those jobs is crucial and that that is why, for example, the transfer of the sub-sea technology department to Glasgow is so welcome? Can my right hon. Friend give any indication of the timetable for the transfer of that important work?

Mr. Lawson: My hon. Friend is right. On the timetable, BP will carry out that transfer as soon as practicable—[Interruption.] It is of importance. When I visit Scotland the point is often made to me that the jobs that people in Scotland seek are high grade jobs. The jobs to which my hon. Friend referred and to which I referred in my statement are jobs for senior executives and high and top level technologists. They are just the sort of jobs that the Scottish people have wanted to see in Scotland.

Mr. Frank Doran: On the version in the Chancellor's statement, I think that we can take it that he has battered BP into submission. Is he aware that Britoil's employees in my constituency are still extremely concerned about their job prospects? Did the Chancellor receive undertakings from BP about future developments in, for example, the Don, the Ettrick and the Amethyst fields which would protect those jobs and guarantee their future?

Mr. Lawson: Clearly there were no specific agreements about individual fields, but there was an undertaking to increase exploration activity substantially. That can only be good news for the United Kingdom offshore oil industry based in Scotland.

Mr. Robert B. Jones: Will my right hon. Friend note that if he wants evidence of commitment to Scotland by BP he need look no further than Grangemouth because not only is that Scotland's only refinery but there has been a substantial programme of investment there? When Opposition Members huff and puff about BP, will my right hon. Friend remind them that during the oil price crash Britoil laid off people right left

and centre, whereas a large conglomerate such as BP was in a much better position to protect the jobs of its employees?

Mr. Lawson: I think that my hon. Friend is implying that, as usual, Opposition Members are completely out of touch with reality and with the British people. He is quite right.

Mr. Alistair Darling: Does the Chancellor accept that the undertakings given by BP are remarkably similar to those that were given by the Guinness company, and they were broken? What does the Chancellor plan to do to enforce those promises, or is this another example of major influence on the Scottish economy passing, in this case, not just to London, but to the shores of the Gulf?

Mr. Lawson: I have already explained—I am not sure whether the hon. Gentleman understood it—that we shall for the time being retain the special share, with all its powers, to ensure and to satisfy ourselves that the undertakings are carried out. I greatly deplore the slurs that the hon. Gentleman and his right hon. and hon. colleagues are making about BP.

Mr. Nicholas Fairbairn: I congratulate my right hon. Friend on achieving what he has achieved as a demostration of his conscious responsibilities as a Minister peculiarly responsible for matters in all parts of the United Kingdom. The opportunities that he has obtained for executives at senior level to come to Scotland will enable them not only to enjoy the highest standard of living in the United Kingdom, but to promote the huge surge of industry, energy and prosperity which Scotland has enjoyed under this Government.

Mr. Lawson: As usual, there is much in what my hon. and learned Friend says. I believe that it would be more constructive and certainly a great deal better for Scotland if right hon. and hon. Members on the Labour Benches would occasionally stop all this carping and tell the world of the successes of the Scottish economy.

Mr. Brian Wilson: Is the Chancellor saying that anyone who objects to the agglomeration of independent companies into already huge multinational companies is guilty of carping and, by definition, guilty of attacking the company that is doing the acquiring? Does the Chancellor agree that he has made the Secretary of State for Scotland look more than usually absurd? Only last Thursday the Secretary of State for Scotland, in a much-hyped speech, boasted that privatisation led to greater corporate control resting in Scotland. How does the Chancellor equate what has happened to Britoil, with its movement from the public to the private sector and its eventual movement from control in Scotland to Kuwait, with the statement made by his right hon. and learned Friend?

Mr. Lawson: I agree entirely with what my right hon. and learned Friend said. I assure the hon. Gentleman that there is no question of control moving to Kuwait. As for my right hon. and learned Friend looking unhappy, he does not look very unhappy to me, and I should be surprised if he were because I consulted with him throughout the negotiations.

Sir Peter Hordern: Since this is the first time that the golden share technique has been tested in this way,


will my right hon. Friend say whether other companies in which the Government hold a golden share may also be subject to a takeover bid subject only to the consent of the Government?

Mr. Lawson: Each golden share has its own terms and conditions. However, with the exception of Enterprise Oil, where the golden share terminates at the end of the year, pretty well all the other golden shares restrain a holding to 15 per cent. Therefore, the situation is rather different from the situation that pertains in the case of Britoil.

Mr. Ted Rowlands: The Chancellor has made reference to the statements that he has previously made. Does he recall the statement he made from the Dispatch Box about the flotation of Britoil? He said that the purpose of that flotation was to create a new, independent company—independent of the oil majors. If it was a good thing then, why is the destruction of such independence now considered a good thing?

Mr. Lawson: We created a new, independent oil company and freed it from state control and, since then, it has done well. What I also said—indeed it was also said by the right hon. and learned Member for Monklands, East (Mr. Smith) —was that the purpose of the golden share was to prevent a takeover by anybody who the Government considered to be unacceptable. The whole point is that, as a result of the discussions, we have achieved a situation where there is an acceptable takeover of Britoil.

Mr. Bill Walker: Does my right hon. Friend realise that there are many Scots who will welcome the statement in the form that it has taken today because they are proud of being Scots and proud of being British? Will my right hon. Friend confirm that BP's independence as a British company — operating as it does in the international market of which, by nature of the business, it must be part — is now much stronger and better because BP and Britoil together are obviously a much safer and better company than they were apart?

Mr. Lawson: As my hon. Friend says, it must clearly be the case that the acquisition of Britoil has considerably strengthened BP.

Mrs. Maria Fyfe: Will the Chancellor tell us to whom this takeover is acceptable?

Mr. Lawson: It is acceptable to Her Majesty's Government and it would also appear acceptable to the shareholders of Britoil, some 80 per cent. of whom have accepted the offer.

Mr. Anthony Beaumont-Dark: Will my right hon. Friend accept that many of us thought that there was an inevitability about Britoil being taken over by BP and that it now becomes even more significant that BP stays British and does not become Kuwaiti? Will my right hon. Friend let us into the secret at to what his views would be should someone who is not a British national make a takeover bid for one of our greatest British companies in the oil industry?

Mr. Lawson: I do not believe that it is sensible to engage in hypothetical speculation, but I am confident that BP will remain British.

Mr. Terry Patchett: Can the right hon. Gentleman inform the House how much more of the family silver is left to sell off?

Mr. Lawson: That is a pretty tired old simile. I am proud to say that the privatisation programme will continue for many, many years to come.

Mr. Peter Rost: Will my right hon. Friend remind the House that BP was not prevented by the American Government from taking 100 per cent. control of Standard Oil — without any special share — even though Standard Oil is much larger than Britoil and happens to own the largest oil reserves in North America? What is all the fuss about?

Mr. Lawson: I believe that my hon. Friend puts an extremely valuable perspective on the discussions that we have had this afternoon.

Mr. Rhodri Morgan: Does the Chancellor agree that he has brought a considerable amount of this humiliating climb-down on himself? In mid-October 1987, he demonstrated, in proceeding with the share sale, that he was a devotee of the James Anderton philosophy of privatisation—flog the underwriters until they beg for mercy. Does he not agree that had he not alienated the management board of BP on that occasion he would have found the subsequent negotiations when trying, with the use of the golden share, to scare it off from acquiring Britoil far easier to undertake?

Mr. Lawson: I am sure that the BP underwriters will be grateful for the hon. Gentleman's solicitude.

Mr. Quentin Davies: Although they have not been mentioned this afternoon, does my right hon. Friend agree that the interests of the Britoil shareholders are worth some consideration? The Government would have had to have extremely strong reasons to justify intervening to prevent them from accepting an otherwise extremely attractive offer.
Does my right hon. Friend also agree that it would have been quite absurd and totally wrong to use the golden share as a way of freezing the structural shareholding of a particular company in a particular way for all time? Markets evolve and in the past few years the oil market in particular has changed substantially. It would have been wrong to prevent BP from having the chance to emerge in the future as a greatly expanded and strengthened major vertical company based both in England and in Scotland.

Mr. Lawson: My hon. Friend makes a number of pertinent remarks. I would only repeat that I believe that the arrangements that have been put in place are good for the North sea oil industry and good for Scotland. My hon. Friend is right to mention the position of the Britoil shareholders. That was certainly one of the factors that I had to take into account.

Mr. D. N. Campbell-Savours: Will the Chancellor confirm that nearly two thirds of the shares recently sold in BP have been bought by the Kuwaitis? Is he protesting about that to the Kuwaiti Government? What have they said in response? Have they given any assurances or does he intend that they build up a holding of 29·5 per cent. before he does anything?

Mr. Lawson: It is well known that the Kuwait Investment Office holds a little more than 20 per cent. of the ordinary shares of BP. It is also well known that the


Kuwaitis have given an undertaking and an assurance to the Government that they regard this as a long-term investment and that they have no interest whatever in the control and management of BP.

Mr. Ian Bruce: Does my right hon. Friend agree that the overwhelming stench of humbug coming across from the Opposition Benches today should be repudiated? In view of the undertakings given by BP, perhaps he will take into account my constituents, who have Wytch Farm in their area and rely on BP's good name for maintaining the oil interests of my constituency. When he next talks to BP, and given that Scottish Members do not want headquarters jobs in their constituencies, perhaps he will consider bringing jobs to Swanage and Wareham.

Mr. Lawson: Wytch Farm is the most successful onshore oilfield in the United Kingdom. I am sure that it brings considerable benefits to my hon. Friend's constituents, about which he is fully aware.

Mr. Dennis Skinner: One thing is certain: the Chancellor of the Exchequer has proved the old adage, as my hon. Friend the Member for Hackney, South and Shoreditch (Mr. Sedgemore) has just reminded me, that all that glitters is not gold. What guarantee have BP and the Kuwaitis given him that they will not break their promise in the same way that he broke his promise to the House on the golden share? Is he aware that all the shenanigans that have taken place with British oil companies have provided the Left with a perfect platform for arguing the case for public ownership in the future?

Mr. Lawson: I was not aware that the Left of the Labour party, or, indeed, any part of the Labour party, needed any excuse for arguing the virtues of state ownership. It appears to have done it without any excuse. When the Labour party has been in power, it has done great damage to this country, but that will not happen again. I strongly resent the accusation that I have been dishonest with the House of Commons. I have not.

Mr. Phillip Oppenheim: Surely what is best for British business and thus for British jobs is that there should be no politically imposed Scottish solutions on British business — [Interruption]— but rather that Britoil should be free to make its own commercial decisions, free from political interference and special pleading.

Mr. Lawson: I am afraid that there was so much noise from the Opposition Benches that I was not able to hear that question.

Mr. Geoffrey Dickens: rose—

Hon. Members: Oh!

Mr. Speaker: Order. Let us hear this question.

Mr. Dickens: Does my right hon. Friend agree that in answering questions—[Interruption.]

Mr. Speaker: Order. Give the hon. Gentleman a chance.

Mr. Dickens: Does my right hon. Friend agree that, when Ministers are replying to questions similar to that of the hon. Member for Bolsover (Mr. Skinner), we ought to remind hon. Members that the British Government have

the sanction of removing the board of Britoil if it goes back on its agreement, and that it is the British Government who issue licences for exploration and place a tax structure on oil companies? With all that behind us, why on earth are we worried about a multinational company which has to compete with other multinational companies? We cannot be parochial any longer. We must compete with the rest of the world and, to do that, we must be strong.

Mr. Lawson: I was able to hear that question, and I agree with everything that my hon. Friend said.

Points of Order

Mr. Gavin Strang: On a point of order, Mr. Speaker. I wish to raise an important point of order arising from the Prime Minister's answer to my question this afternoon. The Prime Minister stated that the contract between the South of Scotland Electricity Board and British Coal will come to an end at the end of March. Opposition Members challenged her on that from a sedentary position and she went on to say that, if that were the case, there was no problem. However, only within the past few days, British Coal has taken the South of Scotland Electricity board to court.

Mr. Speaker: Order. This appears to be a continuation of Question Time. What is the point of order for me?

Mr. D. N. Campbell-Savours: It is a genuine point of order.

Mr. Speaker: Order. I am sure that every hon. Member who raises a point of order has a genuine reason for doing so, but I cannot say whether an answer is right or wrong.

Mr. Strang: Further to the point of order, Mr. Speaker. The important point is that the matter is before the courts. British Coal and the SSEB are currently before the courts seeking a decision on whether the contracts applying to Longannet and Cockenzie end at the end of March or in 1992. Did the Prime Minister breach the sub judice rule?

Mr. Speaker: Order. I do my homework on these questions. I am not aware that any date has been set down for this case.

Mr. Tam Dalyell: On a point of order, Mr. Speaker. This is a matter which concerns the whole House, regardless of Government or Opposition support. It is the practice of Ministers to refer to a document and say that something will be found in it, but when one studies the document one finds that what Ministers have asserted is in it tends not to appear in the document specifically.
The House will recall that the Chancellor of the Exchequer referred us to a document in the Library. It so happens that, in the Library, there is the letter of 23 February from Sir Peter Middleton, permanent secretary to the Treasury, to Sir Peter Walters, chairman of BP, but nowhere in that document is there any undertaking of the kind that the Chancellor said that we would find. It is a gross abuse of the House of Commons for Ministers to refer to documents that are not immediately available. There is certainly something in those documents, but, lo and behold, when we read them, what is asserted to be in them tends not to be there. That is a ministerial abuse of the House.

Mr. Speaker: Order. The hon. Gentleman will have to follow that up in a subsequent question. I cannot deal with it.

Mr. Ken Maginnis: On a point of order, Mr. Speaker. I wish to raise an important point of order regarding Prime Minister's Question Time. You will be aware that a serious incident occurred in my constituency this week. The hon. Member for Orpington (Mr. Stanbrook) referred to the matter during Question Time. That serious incident resulted in the death of a young man and, subsequently, in a foreign Government deciding to hold an inquiry into the event at Aughnacloy. I tried to intervene, without success, in Prime Minister's Question Time today, as I have done time after time during the past eight months.

Mr. Speaker: Order. The hon. Gentleman must understand that I am obliged to balance questions in the House and I shall seek to call hon. Members who have not previously been called to ask questions of the Prime Minister. I am well aware of the hon. Gentleman's concern about his constituent, and I am sorry about that, but, with the best will in the world, I cannot possibly call the hon. Gentleman whenever an incident occurs in his con-stituency. There will be other opportunities.

Mr. Maginnis: Further to that point of order, Mr. Speaker.

Mr. Speaker: Order. The matter does not arise. I am sorry, but I have already called the hon. Gentleman once during Prime Minister's Question Time. He will be called again, but I cannot call him just because he rises. Many hon. Members rise to ask questions.

Mr. Maginnis: Further to that point of order, Mr. Speaker.

Mr. Speaker: Order. No, it does not arise.

Sir John Farr: On a point of order, Mr. Speaker. I should like to raise a point of order regarding Standing Committee proceedings tomorrow. The Hansard for last Wednesday's proceedings of Standing Committee C is not yet available. That will not necessarily prevent the Committee from proceeding, but it is a grave discomfort for Committee Members. I should be most grateful if you would investigate the matter.

Mr. Speaker: I shall look into that.

Mr. Andrew Faulds: On a point of order, Mr. Speaker. Was not this afternoon an example of the difficulties that the House gets into because, Sir, of your new practice of postponing points of order until a later time in the day? There was an occasion this afternoon when the Prime Minister should have been called to order immediately, but, because of your intervention in postponing the point of order, it could not happen. We are now in the difficulty that a matter has been raised on which you have postponed a decision—quite rightly—and we shall require another ruling from you.
Would it not be advisable to reconsider this arbitrary introduction that you, Sir, created, of postponing points of order which are relevant when they are raised, but are not relevant one, two or three hours later?

Mr. Speaker: I do not propose to go back on this matter. It is certainly not an arbitrary ruling of mine. I am merely returning to what used to be, and has always been, the practice in this House.
The trouble with having points of order arising out of questions is that, by their very nature, they invite a continuation of Question Time. I think the whole House agrees that the present practice is for the best.

Mr. Faulds: rose—

Mr. Speaker: Order. I am not hearing any more from the hon. Gentleman about that; I have dealt with it.

Rev. Martin Smyth: Further to that point of order, Mr. Speaker. Would it be possible for you to enlighten me? I understood you to say that you were reverting to an old practice of the House. I have not been an hon. Member for long, but other hon. Members keep telling me that the old practice was to raise points of order when the questions arose. Would it be possible to learn when the old practice became a new practice, to be superseded by an old practice?

Mr. Speaker: I can tell the hon. Gentleman that. In the Parliament before last, that practice began to grow, when the Speaker of the day took the view that, in order not to disrupt Question Time, he would take points of order at the end. I have reverted to the practice that previously existed. I shall be happy to send the hon. Gentleman details of the statement that I made at the time—I do not have it with me now.

Mr. Chris Mullin: On a point of order, Mr. Speaker. I seek your advice. Last Thursday, a Home Office Minister declined to answer eight questions that had appeared on the Order Paper on the ground that the case in question was sub judice. The case, however, was not referred to the House of Lords and was not sub judice. I should be grateful for your clarification on that point, and for your confirmation that there was nothing to prevent the Minister from answering questions on the subject. Is it not about time that Ministers stopped sheltering behind the sub judice rule?

Mr. Speaker: I think that the hon. Gentleman is asking about the case of the Birmingham six. I can tell him that, from the latest information I have, it is not sub judice under the rules of the House.

Mr. Eric S. Heffer: On a point of order, Mr. Speaker. Could you explain to the House when and why the system was changed whereby hon. Members could rise and say they were not in agreement with what had been said in reply to their questions and would seek to raise the issue on the Adjournment?

Mr. Speaker: That has not been changed; it frequently happens even today. I shall take one more point of order, but we have an important debate on steel—

Mr. Alexander Eadie: On a point of order, Mr. Speaker—

Mr. Speaker: I am telling the hon. Gentleman that a large number of hon. Members want to take part in the steel debate, on which there is a time limit.

Mr. Eadie: Further to the point of order raised by my hon. Friend the Member for Warley, East (Mr. Faulds), who wrongly left the Chamber. I want to put it to you that when we are dealing with rules that you have decided arbitrarily, we must sometimes reflect on whether, in the light of our experience, they require reconsideration—

Mr. Speaker: Order. I hope the hon. Gentleman did not say "arbitrarily".

Mr. Eadie: I am saying that you decided the rule. If you decided it, it is arbitrary. I should welcome correction from you, Mr. Speaker—

Mr. Speaker: I should be happy to send the hon. Gentleman the ruling that I made at the time, with the background to it.

Mr. Eadie: I am continuing with my point of order, Mr. Speaker, whether you like it or not.

Mr. Speaker: I do not mind at all; it is a question whether the hon. Gentleman's colleagues will object.

Mr. Eadie: I was raising the issue whether you should consider what happens to our procedures in the light of experience. What was drawn to your attention this afternoon happened because of the procedure of taking points of order after Question Time. It certainly looks as if the Prime Minister, or the Executive, was protected today, when, as was drawn to your attention, the right hon. Lady made a statement about a matter that was about to come before the courts. When the Prime Minister of the country makes a statement, I am sure that it will be transmitted to the courts and could, to some extent, prejudice, or help to prejudice, any decision by the courts.
I am referring to the issue of the SSEB coal contract in Scotland. All I am asking you to do, Mr. Speaker—I know that you are in a hurry, but I rarely raise points of order—is to consider, in the light of what has happened today, the fact that as you are the protector of Back Benchers you do not want to over-protect the Executive. To some extent, the Prime Minister abused privilege this afternoon, and you listened to that.

Mr. Speaker: Of course, it is my duty to ensure that Back Benchers' rights are protected. As far as I am aware —I briefed myself before Question Time—the case has not been set down for a hearing before the courts. It is therefore not sub judice. If I am wrong, I shall, of course, apologise to the House.

Mr. Dennis Skinner: On a point of order, Mr. Speaker. As you rightly suggested much earlier, there have been variations on the procedure of points of order during the time that you and I have been Members of the House. It is true that for a long time points of order were raised on questions immediately after they occurred — indeed, that was so for the greater part of the time that I have been here. A few months ago, in 1987, you took it upon yourself to try to be firm and to have all points of order raised after statements so that they could all be collected together. It may not have been the only reason, but certainly one of the criteria for that was the fact that Ministers, who are busy people, arrange to make statements and want to get away from points of order that could occur straight after Question Time, before a statement or business questions might delay them. I can understand that, even though I might not agree with it. You, Mr. Speaker, might have taken a different view.
I have raised this subject before and I am concerned about it. It is fair to say that if the practice stays for as long as you hold your office, Mr. Speaker, and Back Benchers' points of order immediately after questions are disbarred, Front Benchers, who in times of heat, passion and argument, may want to break that rule must be expected to abide by it. As I have said before, there was a slight

variation on the rule on one occasion. I suggest that 1f it applies to my hon. Friends and other hon. Members it must hold fast at all times for all Front Benchers.

Mr. Speaker: I am always prepared to keep such matters under review. I am merely going back to the practice that always obtained in the past. The trouble with asking hon. Members whether a point of order arises out of questions is that the inevitable answer is, "Certainly, Mr. Speaker; of course it does." We then get two slots for points of order in that way. That wastes the time of the House and in any event Ministers do not get an opportunity to reply to the points, because Question Time is over.

Mr. David Winnick: Further to that point of order, Mr. Speaker. At one time, you made a distinction between hon. Members who wanted to raise points of order directly arising from questions and those who raised other points of order. If you give that further reflection, you will see that, if Question Time ends at 3.30 pm and an hon. Member cannot raise his point of order arising out of it until 5 pm, and in the meantime there have been two statements, and so on, the point of order loses a great deal of relevance.
As you have repeatedly stated, Mr. Speaker, that one of your functions, like that of your predecessors, is to protect Back Benchers—we have limited rights in many respects about asking questions and being called — I should have thought that there was a very strong case for a trial period of six months to see what occurs. Hon. Members who want to raise points of order arising from questions should be asked to do so immediately after Question Time.

Mr. Speaker: Points of order are one thing. As to the practice of the past, the hon. Gentleman needs only to look at Hansard of those days to find that very rarely —almost never —were they points of order; they were points of dispute about a statement or an answer given to a question.

Statutory Instruments, &c.

Mr. Speaker: With the leave of the House, I will put together the 12 motions relating to statutory instruments.
Ordered,
That the Environmentally Sensitive Areas (Somerset Levels and Moors) Designation (Amendment) Order 1988 (S.I., 1988, No. 176) be referred to a Standing Committee on Statutory Instruments, &amp;c.
That the Environmentally Sensitive Areas Designation (Wales) (Amendment) Order 1988 (S.I., 1988, No. 173) be referred to a Standing Committee on Statutory Instruments, &amp;c.
That the Environmentally Sensitive Areas Designation (England) (Amendment) Order 1988 (S.I., 1988, No. 174) be referred to a Standing Committee on Statutory Instruments, &amp;c.
That the Environmentally Sensitive Areas (The Broads) (Amendment) Order 1988 (S.I., 1988, No. 175) be referred to a Standing Committee on Statutory Instruments, &amp;c.
That the Environmentally Sensitive Areas (Cambrian Mountains-Extension) Designation Order 1987 (S.I., 1987, No. 2026) be referred to a Standing Committee on Statutory Instruments, &amp;c.
That the Environmentally Sensitive Areas (Lleyn Peninsula) Designation Order 1987 (S.I., 1987, No. 2027) be referred to a Standing Committee on Statutory Instruments, &amp;c.


That the Environmentally Sensitive Areas (Breckland) Designation Order 1987 (S.I., 1987, No. 2029) be referred to a Standing Committee on Statutory Instruments, &amp;c.
That the Environmentally Sensitive Areas (North Peak) Designation Order 1987 (S.I., 1987, No. 2030) be referred to a Standing Committee on Statutory Instruments, &amp;c.
That the Environmentally Sensitive Areas (Shropshire Borders) Designation Order 1987 (S.I., 1987, No. 2031) be referred to a Standing Committee on Statutory Instruments, &amp;c.
That the Environmentally Sensitive Areas (South Downs-Western Extensions) Designation Order 1987 (S.I., 1987, No. 2032) be referred to a Standing Committee on Statutory Instruments, &amp;c.
That the Environmentally Sensitive Areas (Suffolk River Valleys) Designation Order 1987 (S.I., 1987, No. 2033) be referred to a Standing Committee on Statutory Instruments, &amp;c.
That the Environmentally Sensitive Areas (Test Valley) Designation Order 1987 (S.I., 1987, No. 2034) be referred to a Standing Committee on Statutory Instruments, &amp;c. — [Mr. Wakeham.]

Points of Order

Mr. Ken Maginnis: On a point of order, Mr. Speaker. May I ask for your guidance, in relation to the point of order that I tried to raise earlier? When you rose to your feet, I sat down. Thereafter, I was precluded from making my point of order. As Northern Ireland is governed and legislated for through Orders in Council, I am unable, as an hon. Member representing Northern Ireland, to change any legislation that the Government may bring forward. In the past eight months I have been called only once during Prime Minister's Question Time. What is my role in the House in terms of representing my constituents? Do I have a role?

Mr. Speaker: The hon. Gentleman must bear in mind the fact that he is one of a number of Members who represent Northern Ireland constituencies. During Prime Minister's Question Time I always attempt to call an hon. Member from one of the minority parties, but it would be impossible to call all of them. The hon. Gentleman is one hon. Member among 650. I must deal with all hon. Members fairly.

Mr. Tam Dalyell: On a point of order, Mr. Speaker.

Mr. Speaker: Of course I shall take the point of order, but it will affect the hon. Gentleman's colleagues who wish to take part in the steel debate. I hope that I shall not receive any complaints at the end of the debate.

Mr. Dalyell: My point of order arises from what happened yesterday when my hon. Friend the Member for Hackney, South and Shoreditch (Mr. Sedgemore) and others asked questions of you, Mr. Speaker, about the Master of the Rolls. You said that you would reflect on the matter, and I was wondering whether you would be making a statement to the House. The statement has been made much more urgent by what happened in the Scottish courts today regarding the Anthony Cavendish affair and Lord Coulsfield's judgment. The relationship between Parliament and the courts is assuming an extra urgency.

Mr. Speaker: As the hon. Gentleman has raised the matter, I shall reply. I have considered the matter, as I undertook to do yesterday. The rule—which is set cut in "Erskine May" on pages 430 and 431—is that,
Unless the discussion is based upon a substantive motion, drawn in proper terms, reflections must not be cast in debate upon...
certain persons, including peers and judges. That is not to say that hon. Members may not express disagreement with the decisions of judges in cases that are not sub judice, so long as they express their disagreement in proper terms. Nor does it mean — this is the point that the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) raised with me yesterday — that where a person who is covered by the rule undertakes activities in another capacity he may not be criticised in that capacity. For instance, criticism has been permitted of the activities of a member of another place in his role as a newspaper proprietor.
What our rules do not permit, unless it is on a substantive motion, is criticism of the private conduct of a judge of the kind that reflects on his capacity to hold that office.

Mr. Dalyell: Obviously this is an important statement on which the House would wish to reflect. Is, as we interpret it, the House of Commons taking a stand against the behaviour of the Master of the Rolls, not as a judge but more in his role as a politician?

Mr. Speaker: I ask the hon. Gentleman to study carefully what I have said in this considered statement.

Mr. Dennis Skinner: Further to that point of order, Mr. Speaker. You said that it is right and proper for hon. Members to criticise, among other people, judges such as the Master of the Rolls, Lord Donaldson, when they are acting in a capacity that is not in line with their job as a judge. What we argued yesterday, which you have taken on board, is that he had entered the political arena. As opposed to carrying out judgments, he was saying that it was quite all right for somebody to break the law. We challenged that in terms of a motion and he entered the fray and started making comments publicly. He then entered into correspondence with his friend the Prime Minister.

Mr. Speaker: As I understand it, this is part of the judgment, not acting in a different capacity at all.

Mr. Skinner: The point that I am trying to make is that he erred along the narrow line that he should tread as a judge in interpreting the law as passed by Parliament. We are arguing that, now that he has trampled on to a different course, it is right and proper for us — in accordance with your statement, Mr. Speaker — to challenge him because he has voluntarily decided to move out of that narrow, restricted legal arena into the political arena. If he does that, it is right that we should be able to criticise. I think that your statement, Mr. Speaker, vindicates what we have been saying. We will carry on.

Mr. Speaker: My statement was intended to refer to another case that was mentioned yesterday concerning a former judge who appeared on television and made some statements. That is acting in a different capacity.

Myalgic Encephalomyelitis

Mr. Jimmy Hood: I beg to move,
That leave be given to bring in a Bill to require an annual report to Parliament on progress made in investigating the causes, effects and treatment of myalgic encephalomyelitis.
First, I should like to pay tribute to the many sufferers who have written to me in the past few days telling me of their personal suffering from the illness myalgic encephalomyelitis—an illness that is also known as post-virile fatigue syndrome.
I should like to pay tribute to the Myalgic Encephalomyelitis Association and the myalgic encephalomyelitis action campaign for the tremendous work that they do for the sufferers of this terrible and devastating illness and for the help that they gave me in preparing the Bill.
The ME illness was first observed in Britain 33 years ago in 1955, but it was observed in other countries as early as 1939. Research into the disease is being carried out in Britain at St. Mary's hospital in Paddington, Glasgow university and establishments elsewhere. Research is also being carried out abroad, notably in Australia and the United States of America.
Research shows that ME appears to be caused by virile infection, combined with a disfunction of the immune system. There is no doubt that ME is an organic disease. The nature of the disease is such that it primarily strikes the central nervous system, the brain and body muscles. Its most common symptom is a profound weakness of the body, which results in even the most active of people being confined to their bed for long periods, sometimes years.
Another symptom that is more distressing than that is the illness's effect on the brain. Some normally bright, alert people find themselves unable to function. Their concentration goes; they have difficulty speaking; and even conversation leaves them completely exhausted. Sufferers lose their jobs and their lives come to a halt. Children affected lose out on their education, sometimes for years. For many children the disease totally devastates their lives.
The greatest suffering of all is the anguish caused by misdiagnosis. On top of the physical and mental stress caused by the disease, sufferers' agonies are compounded by being told that they are well, that there is nothing wrong with them, that they are malingering, or that they are neurotic. It is widely acknowledged that many incidences of suicide result from the refusal of doctors to accept that sufferers are ill from myalgic encephalomyelitis.
The Bill is a simple measure which merely requires the Secretary of State to make an annual report to Parliament describing the progress that has been made in investigating the causes, effects, incidence and treatment of ME. Such

a report would be of enormous value in drawing the attention of the medical profession, sufferers themselves and others to whom sufferers may turn for help to what is known about the illness. I cannot emphasise enough how vital it is to give proper recognition to the condition, as the failure to recognise the reality of the illness causes sufferers such great and wholly unnecessary distress.
The following are authentic examples of suffering caused by ME. A mother wrote to me saying:
My son aged 18 died from this miserable illness last March. He was away at university and had been ill on and off for two years. It all started with an attack of glandular fever. Now we look back over this time and so many things fit into a pattern. He was an active, bright young man with a zest for living and life. This illness got in his way.
She concluded by telling me that her son committed suicide.
Then there was Jill from Sussex, who said:
I have been to hell and back with this devastating illness. I am still not recognised or getting proper benefits.
I have received hundreds of letters about similar experiences from all over Britain, as well as Northern Ireland and the Isle of Man.
Many well-known persons are afflicted with the disease. Sufferers include the Dean of Westminster; David Provan, a Scottish international footballer who had to retire from a promising career; a famous ballet dancer who is now confined to a wheelchair; and Clare Francis, a well-known adventurer and authoress. I inform the House that one of its Members, my hon. Friend the Member for Pontypridd (Mr. John), who is a sponsor of the Bill, is a sufferer.
I submit that the case for justice for ME sufferers is proved beyond all doubt. I have tried today to resist the temptation to speak in strong terms about the failure of the medical profession to recognise myalgic encephalomyelitis and the failure of the Department of Health and Social Security to recognise the plight of ME sufferers. The sufferers are denied proper recognition, misdiagnosed, vilified, ridiculed and driven to great depths of despair. They look to this House for justice. For them all I commend the Bill to the House.
Question put and agreed to.
Bill ordered to be brought in by Mr. Jimmy Hood, Mr. Alfred Morris, Mr. Jack Ashley, Mr. Brynmor John, Mr. Don Dixon, Mr. Alan Meale, Dr. Lewis Moonie, Mr. Sam Galbraith, Ms. Harriet Harman, Mr. Jimmy Wray, Mr. Tom Clarke and Mr. Jerry Hayes.

MYALGIC ENCEPHALOMYELITIS

Mr. Jimmy Hood accordingly presented a Bill to require an annual report to Parliament on progress made in investigating the causes, effects and treatment of myalgic encephalomyelitis: And the same was read the First time; and ordered to be read a Second time upon Friday 15 April and to be printed. [Bill 99.]

Orders of the Day — British Steel Bill

Order for Second Reading read.

Mr. Deputy Speaker (Sir Paul Dean): Before we begin the debate, I should tell the House that Mr. Speaker has not selected either of the amendments on the Order Paper.

Mr. Michael Fallon: On a point of order, Mr. Deputy Speaker. Regarding the conduct of the debate, you will be aware that Mr. Speaker has received many applications from right hon. and hon. Members to participate in the debate, but you will have observed also that there is no amendment on the Order Paper standing in the name of the Leader of the Opposition. As the trade union movement seems to be in support of the Bill and Labour Members are divided on whether to oppose the Bill in principle, will you be taking that into account when you consider whether to conform with your usual practice of calling hon. Members alternately across the Chamber?

Mr. Bryan Gould: Further to that point of order, Mr. Deputy Speaker. If I may correct a quite erroneous assertion by the hon. Member for Darlington (Mr. Fallon), I have the authority — which is hardly needed, given their well-known position on the subject — on the basis of recent conversations with the TUC steel committee and the Iron and Steel Trades Confederation, to make it clear that they are totally opposed to the Bill, as is Her Majesty's Opposition. There is no amendment because we propose to vote against the Second Reading.

Mr. Deputy Speaker: I am sure that all will be revealed during the debate.

Mr. Alex Salmond: On a point of order, Mr. Deputy Speaker. Would it not have been in order for the Chair to select the amendment in the name of my hon. Friends and me or that in the name of the Liberal party?

Mr. Deputy Speaker: As I am sure the House knows, Mr. Speaker does not give reasons for selecting or not selecting amendments. I have announced Mr. Speaker's decision to the House, which is that neither amendment has been selected. That does not mean, of course, that the arguments on those amendments cannot be advanced in the debate; they can.

The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Kenneth Clarke): I beg to move, That the Bill be now read a Second time.
I welcome the unusual exchange through points of order between my hon. Friend the Member for Darlington (Mr. Fallon) and the Opposition Front Bench. Like my hon. Friend, I had not received a great deal of opposition from the Labour party before today. We look forward to the arguments of the Opposition. We are sure that force of persuasion in the course of the debate will get them, even at this late stage, to reconsider their position and to vote for the Bill's Second Reading.
In the past, steelmaking as an industry has given rise to high passions and strongly held views. Anybody who pays a visit to a steelworks, as no doubt most of us have,

understands the excitement of the steelmaking process. It conjures up memories of the finest days of the industrial revolution and it is an exciting industry with which to be associated. That high public interest has in many ways been the misfortune of the steel industry over the past 40 years.
The industry has attracted the attention of politicians who wish to control the course of the British economy and have repeatedly sought to impose their own strategies on the industry. Those strategies, not surprisingly, were essentially political and took insufficient account of the market forces which govern industry, even nationalised industry. Many of those strategies led to difficulties.
It is high time that British Steel is seen for what it is. It is a key modern industry, of course — but it is essentially a normal commercial enterprise like any other. It is successful and it belongs in the private sector.
The Government believe that good commercial enterprises should be in the private sector because they thrive better there. They are free of Treasury control, free of ministerial control and further away from political lobbying which raises problems now or in future. Management and work force in a private company are faced by the reality that their prosperity and their job security depend on their success in the market and the satisfaction of their customers. They are exposed to commercial disciplines when they raise their capital. The management are free to take the best decisions about how to tackle the market place. The present management of British Steel and those who work for the corporation will be able to tackle the problems of the market place with great effect.
Echoing what my hon. Friend the Member for Darlington said in what might have been a helpful intervention, I think the nationalisation-denationalisation debate is effectively over in this country. Looking back over the past few decades, that is quite remarkable. After 40 years the public have seen that the great state corporations dreamt of by Herbert Morrison are not in practice efficient providers of goods and services.
Steel debates have aroused great passions in the past. Then, my hon. Friend the Member for Darlington never could have made that comment about whether to nationalise or denationalise steel. Steel is one of the great issues that has caused divisions between parties and within parties — and definitely within the Labour party at certain times in the past. I do not think that those old battles will be fought again. I do not wish to provoke the hon. Member for Dagenham (Mr. Gould), but I shall be surprised if any hon. Member speaking for the Labour party threatens to return the corporation to the public sector, if ever there is a Labour Government. If the hon. Gentleman makes such a promise, he will live to regret it when he returns to his main role of trying to reconstruct the Labour party and make it electable again.

Mr. Fallon: My right hon. and learned Friend has spoken about the view of the Opposition and the view of the management of the British Steel Corporation. Does my right hon. Friend accept that the management and the workers of the British Steel Corporation at BSC Redcar who live in my constituency look forward to the passage of the Bill? They consider that it will give them greater freedom from political interference and the opportunity, for the first time in recent memory, to take a stake in their own industry and have some control over their future.

Mr. Clarke: l am grateful to my hon. Friend, who is closely in touch with the opinions of steel workers in his constituency—[interruption.] In due course I shall listen to speeches from the Opposition which will seek to refute what my hon. Friend has said, but I believe that the underlying current of public opinion in Britain on the nationalisation of such industries has changed irreversibly.
I agree strongly with my hon. Friend that steel workers have also undergone a change of opinion. My contacts with steel workers confirm that most of them realise that the change in the steel corporation in recent years have been beneficial, and they look forward to privatisation.

Mr. Donald Coleman: rose—

Mr. D. N. Campbell-Savours: rose—

Mr. Clarke: The debate is showing signs of arousing passions that I thought were extinct in the Labour party. It is good to see history repeating itself.

Mr. Campbell-Savours: If the terms of trade were to change against the steel industry, and if it were suddenly to move into a period of international pressure, which could happen under any Government, and if it suddenly were to be losing a lot of money, does the Minister rule out the possibility of bringing it back into the public sector? Would the Minister's attitude be to let it go and to lose it, or would the state have a new role to play in those conditions?

Mr. Clarke: I must not spend too long discussing issues of principle, though they are interesting and I would like to spend as much time as possible on them. As the hon. Member for Workington (Mr. Campbell-Savours) appreciates, whether a company is nationalised or denationalised, it cannot be immune to movements in trade and changes in the market place.
Essentially, the well-being of a state corporation and its employees or a private sector company and its employees depends upon the market and the conditions of trade and how well the company thrives within them. A private sector company has to react when market conditions move against it. History shows that the great private corporations in Britain are more effective at doing that than the nationalised industries, which are usually constrained by the Government not to react until it is too late. That was the case with British Steel, with disastrous consequences, from which we took some years to recover.

Mr. Bob Cryer: Will the Minister give way?

Mr. Clarke: In a moment. I should like to make a little progress. No doubt this theme will be raised throughout the debate.
I shall be interested to see whether the Labour party is in favour of renationalising our key modern industries. That would he quite a surprise, even to people who voted Labour at the last election.
The Bill heralds the start of a new chapter in the history of the British steel industry. It will lead to the end of the saga which began in November 1948, when the Minister for Supply the right hon. G. R. Strauss, during the Second Reading of the Iron and Steel Bill, said:
There is general agreement that this Bill is profoundly important and vehemently controversial … the great majority of the people will share the Government's view that if our country is to prosper and our people to live a higher and a better standard of life, this Bill is essential." — [Official Report, 15 November 1948; Vol. 458, c. 53.]

That is what was said 40 years ago, and I put it to the House that the wheel has now turned full circle. The Bill is not vehemently controversial. It is, however, an important Bill that will allow British Steel to escape from the politial arena and return to the mainstream of British industry in the private sector.
The Iron and Steel Act 1948 and its successor Acts did not achieve all that was hoped for. Thirty years of intervention one way or another could not keep market forces at bay. This is no criticism of the men and women employed in the industry. Despite their best efforts, they were trapped in an industry which was repeatedly obliged by successive Governments from both sides of this House to take decisions which satisfied politicians and which often did not accord with commercial realities. They were also in part the victims of the downturn in the world economy after the mid 1970s. But as a nationalised industry answerable to politicians the corporation lacked the flexibility to cope with the new challenges imposed by that recession. The net result was that the corporation became increasingly hopelessly ill-equipped to compete in the market place. As hon. Members will recall, in the late 1970s it made increasing losses, culminating in 1979–80. in a net loss of nearly £1.8 billion in one financial year which had to be paid for by the taxpayer. That catastrophe was in large measure attributable to the refusal of previous Governments to allow the corporation to face up to commercial realities and take the necessary decisions, painful though they inevitably were.
When the necessary steps were finally taken, they were sometimes more painful than they need have been if a more gradual, market-oriented approach had been adopted from the outset. I readily acknowledge that the price of BSC's present success has been high in terms of job losses. But it is counterproductive to put our heads in the sand and pretend that market forces do not exist. We cannot ignore the market in the private sector, and we cannot afford to do so in the public sector.

Mr. Cryer: When the Minister talks about the reaction of the steel industry, the reaction is to sack workers. Has the Minister made any calculations about the cost to the public purse of putting workers on the dole, the loss of tax revenue, and the cost of unemployment benefit and supplementary benefit payments to the several hundred thousand people who have been put on the dole as a consequence of his Government's policy?

Mr. Clarke: In the short-term, such costs obviously have been incurred, but what was done was not done as the hon. Gentleman characterises it. Workers were not simply sacked; surplus capacity was closed. Redundant plant that would never again make products of a quality that would sell was closed. There was investment in good quality plant and alteration of working practices to ensure that plant again became competitive.
The hon. Gentleman was a Minister in my present Department when the last Labour Government refused to face up to the fact that anything needed to be done until the very last years of their term of office. For a time Labour Ministers forced the corporation to invest in new capacity based on fanciful market forecasts. The Labour Government pursued such a policy when it was, obvious that they were being unrealistic. They refused to turn around until they took some faltering steps by closing the plant at Ebbw Vale and some other plants right at the end of their period of office.

Dr. John Reid: The Minister spoke at great length about the huge losses that were incurred during the period of public ownership. Will he accept that those huge losses and all the financial sacrifices throughout that period, which have led now to a profit, were made by the taxpayer? Can he explain to the taxpayers why, when their money was used during the hard period to subsidise losses, they are not to get the profits now being made, which are to go to a few of his friends in the City of London?

Mr. Clarke: The taxpayer will get the benefit of the proceeds of privatisation and will get the value of what the company is worth on the market. I have never understood the extraordinary argument which is sometimes made by Opposition Members that billions of pounds' worth of losses made over the years are somehow an asset which the taxpayer now owns instead of being money which the taxpayer has waved goodbye to for ever. The Opposition seem to think that somehow the new owners are capable of compensating the taxpayer for those losses. In a good flotation the taxpayer will get the value of the British Steel Corporation as it now is as a result of what has been achieved over the last few years.

Several Hon. Members: rose—

Mr. Clarke: I always spend too long opening debates by giving way too often. I will give way again in a few moments, but I should like to proceed on this theme which is obviously of interest to Opposition Members.
I want to explain what has been done since we inherited the problem to get the corporation back to its present much healthier state. Basically, what we have sought to do is to give the corporation greater freedom to get on with its business even though we as Government remain the owners of it on behalf of the state. The corporation has responded magnificently. The enthusiasm and the commitment of the management and the work force have brought their own rewards. The management and the work force—not the Government—have through their own efforts brought about a remarkable transformation in the fortunes of the corporation.
The corporation recently announced half-year profits of nearly £200 million and all the signs are, and all the reports I am getting indicate, that this success will continue. That is an impressive record and I am delighted to pay tribute to all involved in the British Steel Corporation. In many ways I think that what has happened to British Steel is symbolic of what has happened to the British economy as a whole since 1979. The improvement in BSC's performance is all the more creditable for having taken place in the European market, where there is still substantial overcapacity and under a production quota system which has tended to restrict BSC.
The British Steel Corporation is well placed to consolidate its present strong position as the liberalisation of the European steel market proceeds. As the House knows, I shall have the opportunity of referring to where we are in the European steel regime in more detail in a separate debate later.

Mr. Martin Flannery: The Minister has talked about what happened in 1978–79 and attributed it to a nationalised industry here not understanding market forces. Can he explain what happened to American, German and French steel

throughout that period? Did those industries not lose on a grand scale in exactly the same way, even though they were not nationalised?

Mr. Clarke: The losses and the consequences of the crash would have been less if British Steel had not been allowed to charge headlong to the buffers until far too late in the 1970s. Of course, there was a big downturn in steel demand, as I have acknowledged, in the recession, but all the indications were ignored for a long time by Ministers in the Labour Government who pressurised BSC not to take the decisions which were required to try to prepare for what was to come until far too late. The losses were thereby made much worse.
I have been asked how many jobs were lost in consequence. A large number of jobs were lost. I hope that Opposition Members are not about to assert that it would have been a sensible policy for steel to keep all those people on the books and to keep all the plants open. [Interruption.] Of course, it is the point. If Opposition Members intend to oppose the Bill by saying that they think we were wrong to shed all the labour from British Steel, are they really saying, as was said on behalf of the Labour party by the hon. Member for Kingston upon Hull, East (Mr. Prescott) not long ago, that nationalised industries should largely be looked upon as a way of creating extra jobs and that Government policy on nationalised industries should be to make them take on extra labour as a cure for unemployment? That folly—and it is folly—led British Steel into its problems in the first place. If the Opposition propose to oppose the Bill on the grounds that they still look upon nationalised industries as an employment creating machine, I fear they will take us back to where we used to be.

Mr. Campbell-Savours: Does not the Minister understand that the impact of what he did on Workington was to give thousands of men no hope for the future? Many of those men have never found work. I would have had no objection to the rundown of the steel industry if at the same time it had been accompanied by real measures of employment which insulated communities like mine from the ravages of unemployment. But it did not happen like that. The Government imposed a huge dollop of unemployment on my constituency and we have never recovered. We have schemes, but they do not give people the sense of identity with an industry which they had in the past. The Minister fails to understand. We wanted change in the steel industry. We understood it, but the Government gave us nothing in return.

Mr. Clarke: That is the issue between us. It is a great tragedy that Workington as a town reached the position where it had no future as a major steelmaking town for a variety of reasons which were not the fault of the people of Workington. Those plants could no longer produce steel that had a sensible prospect of being sold in the market place. Therefore, the future for Workington lies in finding alternative employment and new industrial activity of a kind which will give new hope to the town. As we have come out of the recession it has sometimes been difficult to find new jobs on an adequate scale for towns that are disadvantaged by geography and other problems, as Workington is.
As the British economic revival has speeded up, it has steadily had consequences on deprived regions, including steel towns. The more we succeed in getting growth in the


economy and in reviving attitudes which encourage enterprise, the better prospects we have of getting new business and new jobs in towns like Workington. It is happening. Unemployment is falling more quickly in the older industrial parts of the country. If the hon. Gentleman goes to places like Consett, Corby or Scunthorpe, which suffered terrible losses through the closure of steel plants, he will find large numbers of new enterprises, large numbers of new jobs and a whole new future.
One thing which we all appear to be agreed upon and which has to be accepted is that the British Steel Corporation is an example of a flourishing industry. It is a flourishing nationalised industry; it is not because it is nationalised that it is flourishing, but despite that. It is, in fact, an example of an industry which, through considerable efforts by management and workers, has made a success of itself despite being hampered by the inevitable constraints imposed on the commercial freedom of nationalised industries. It is an industry which now knows that its success is dependent on meeting the requirements of its customers. British Steel understands that it operates against a background of world overcapacity in steel and that if it is to prosper in that environment it must place itself in the forefront of new technology, provide the highest quality and operate to the maximum efficiency. This it has done, and will continue to do. British. Steel knows from experience that it is no use relying on Governments. That does not work in the longer term.
The time has come to give the corporation the opportunity to stand alone and to give it the flexibility and independence that it needs to face up to the highly competitive international environment.
The Bill is short and is well precedented by other privatisation Acts. Its provisions are, however, somewhat technical and it may help hon. Members if I spend a short time explaining them.
The Bill itself does not bring about privatisation; it will enable privatisation to take place. The Bill provides, in clause 1, that all of the property, rights and liabilities of the corporation will vest in a successor company. That company will be a Companies Act company limited by shares which in the first place will be wholly owned by the Government. Privatisation will take place when the Government go on to exercise their ability to offer their shares for sale to the public.
The successor company will inherit the whole of the corporation's undertaking, both assets and liabilities. Technically it will be a different person in law from the corporation, but it is our intention, which is represented in the Bill, that it would be regarded for all practical commercial purposes as the same company representing an unbroken continuation of the corporation's undertaking. The vesting is required only to enable the flotation to take place, by changing the status of the corporation from a statutory corporation to a Companies Act company. This transformation amounts to a change in the legal constitution of the company, but does not affect the nature of its activity or the extent of its assets and liabilities. I make it clear at the outset, and this is important, that the corporation will not benefit from any special Government handouts in the process of privatisation, nor do we propose that there will be any write-off of debt.
After vesting has taken place, on a day nominated by order of the Secretary of State, which we call the appointed

day, British Steel plc will be a public limited company wholly owned by the Government. The Government will then be able to sell its shares at any time, and decide the exact timing of that sale according to market conditions and the performance of the company. But for various technical reasons, including the passage of this Bill through both Houses of Parliament, I do not anticipate that it will be possible to contemplate selling those shares until the end of this year, at the earliest.
The corporation will not be dissolved immediately after vesting has taken place. It will continue in existence as a shell. This is necessary because some of the corporation's assets and liabilities are located overseas, and are governed by foreign law. United Kingdom law might not therefore be effective in securing the vesting of all those assets immediately on the appointed day.
The corporation will stay in existence until it has taken such steps as may be required to secure the effectiveness of the vesting of the assets and liabilities in the successor company. As soon as this process has been completed, the corporation may be dissolved by the Secretary of State by order, under clause 10. We are calling the period between vesting and dissolution of the corporation the transitional period. During that period, the corporation will have no powers other than those necessary to effect vesting of its overseas assets.
The successor company will require a capital structure that fits with the requirements of the Companies Act. Clauses 2, 3 and 7 of the Bill provide for that capital structure. At present the corporation has an accumulated deficit on its profit and loss account. That is not debt, as the corporation does not owe the money in its profit and loss account to anyone; it is simply a record of past trading losses that reflects the erosion of the original capital base of the company through its trading losses. It is open, in the private sector, to any Companies Act company to go to the court and apply for a reduction in its capital to write off such accumulated losses. The amount of capital shown on the balance sheet after a restructuring of that kind will then more accurately represent the value of the net assets of the company.
As a statutory corporation, BSC is unable to go to the court to apply for a reduction of its capital, so that will be authorised by the Secretary of State under clause 2. That clause further provides for the extinguishment of the public dividend capital that remains after the reduction. That will not, however, result in taxpayers' money being lost, because, in exchange, securities will be issued to the Secretary of State or to the Treasury, as his nominees, at his direction under clause 3.

Sir Giles Shaw: Will the Minister give way?

Mr. Clarke: I should like to finish with this point. Only the public dividend capital will be extinguished. The successor company will be obliged to continue to meet the terms of any loans from the Government or outside bodies that are vested in it.

Sir Giles Shaw: On the question of treatment of the company's debt and the accumulated loss, I understand my right hon. and learned Friend's reluctance to eliminate the debt. He is describing the somewhat complex and awkward proposal of a company that is about to float being required to continue to take a debt of the order of £700 million, and presumably accumulated losses substantially greater than that. Does my right hon and


learned Friend think that there will be difficulty in achieving the return on the assets, which I believe the company clearly will have?

Mr. Clarke: It will require capital restructuring. I have been endeavouring to describe the nature of capital restructuring that the Bill will facilitate. The accumulated losses on the profit and loss account will need to be written off, in just the way that a private sector company with this kind of trading background would seek to have authority to do, by an application under the Companies Act.
What we are not intending to have is straighforward debt write-offs. That would amount to an attempt to subsidise the corporation by the back door, which we have no intention of doing. We want to give the corporation a proper capital structure. It would be behaving as we would expect it to do if it was in the private sector and able to operate under the Companies Act, by seeking to get its capital structure to reflect its present capital assets and liabilities, and to wipe off these long-standing losses in the profit and loss account.
To the extent that the nominal value of the securities issued to the Government in exchange for cancellation of the Government's investment in the corporation is less than the value of the capital extinguished, the balance will go to make up a statutory reserve of the successor company. That is specified in clause 7. The nominal value of the shares will have to be no more than their sale issue price at the time of the flotation, because the Companies Act forbids the issue of shares at a discount. In practice, it is usual to set a nominal value significantly lower than the anticipated issue price.
Private sector companies generally have a mixture of share and loan capital and reserves. The process of restructuring the balance sheet of the corporation is complementary to the vesting provisions of the Bill. Instead of a nationalised corporation funded by public dividend capital, the successor company will be a Companies Act company, with capital and reserves similar to other Companies Act companies.
The remaining provisions of the Bill are subsidiary and technical. Clause 4 allows the Government to invest in securities of the successor company to maintain the proportionate level of any residual shareholding, if one is retained. The Government's securities in the successor company may be held by nominees, under clause 5. The Government may fix a limit on its future investment in the successor company, under clause 6. Clause 8 provides for the Government to lend money to the successor company while it remains in the public sector. Clause 9 allows the Government to impose temporary restrictions on the borrowing of the successor company. Clause 11 contains provisions relating to taxation of the successor company. Clauses 12 to 17 and schedules 1 to 3 contain other supplementary provisions.
In deciding whether to invest in the new private sector company, potential investors will obviously have to form their own judgment about the track record of the corporation and, in particular, the prospects of the new company. When I came to the House last December and announced our plans for the privatisation of the corporation, I was able to report the good news about the corporation's impressive half year profit. I regard that figure as a reflection of all the hard work that has been put

in by the employees of the corporation, which helps to make it one of the most profitable steel producers in the world. Its productivity has improved every year since 1980.
Its selling prices have risen much more slowly than inflation. Exports are up in absolute terms and as a share of total sales. Capital expenditure has increased steadily since 1982, and customer service has been given much higher priority than before. All that has resulted in great improvements in the quality of the product and the efficiency with which it is produced and dispatched. The results are plain for all to see, and they are all the more impressive for having been achieved in a difficult market.

Mr. Rhodri Morgan: Is the Minister aware that at a recent meeting with the parliamentary Labour party the chairman and chief executive of the corporation said that, after it was privatised, they would have to reduce the proportion of material exported, because its price was so poor that it would not enable them to maximise profitability?

Mr. Clarke: That would depend on movements in international steel prices. We shall have to see what happens to steel prices when European quotas come to an end, as I am sure they will in the next few years; and possibly in six months' time — I shall be dealing with that later tonight —and also what progress is made in getting rid of the excess capacity in other parts of the world.
The fact is that the record of achievement that I am reading out has not been achieved by other European steel corporations, many of which still have vast overcapacity. Once that excess capacity has been reduced, we shall see how the markets shape up.

Mr. Peter Hardy: The Minister has clearly recognised the enormous contribution to the achievements to which he has referred by the work force. In view of that contribution to success, could he not give some reassurance to the work force, before he sits down, that their terms and conditions of service will be no worse under the private operation than they have been heretofore?

Mr. Clarke: The employees of the corporation will continue under the contracts of employment that they have now. As I have said, for all purposes, the new company will be the successor, with all the assets, liabilities and contractual obligations of the previous corporation. I can happily give that assurance.
I hope—and I am not pretending to describe how it can be done today—that we shall enter into discussions to reassure the work force that their accrued pension rights will not in any way be affected. We shall no doubt have plenty of opportunity to discuss pensions between now and the flotation, perhaps in Standing Committee, if not in discussions. It is also our intention, as everybody knows, to move on to the prospect of offering the employees—who, I quite agree with the hon. Member for Wentworth (Mr. Hardy), have made a substantial contribution to the present position — the prospect of having some shares in the successor company and a share of future profits.
The corporation knows that, if it is to survive and progress and protect its business as a whole, it must continue to change and adapt to suit the needs of the market. To do that, it must continue to take decisions on


a commercial basis. Fortunately, here again, we have been able to give reassuring news to the House. BSC has been able to give its commercial judgment of the future for its five integrated plant, including Ravenscraig, which has given rise in recent years to a quite unnecessary level of political controversy north of the border.

Dr. Reid: rose—

Mr. Clarke: I am going to say more on Ravenscraig, so perhaps I had better leave Scottish interventions for a moment or two.
I remind the House that the corporation has been able to say that, subject to market conditions, it expects that there will continue to be a commercial requirement for the steelmaking and continuing casting capacity of the corporation's five integrated plants for at least the next seven years. The hot strip mill raises other problems because there is surplus capacity in hot strip at the moment throughout Europe, and British hot strip mills are running at very low capacity indeed. But, even there, because of the strength of BSC's present position, having reviewed the position thoroughly, the corporation has concluded, on the basis of commercial judgment, that the Ravenscraig mill will continue to operate until at least 1989. [Interruption.]
I look forward to hearing which plants the Opposition are prepared to guarantee against market conditions, which ones they are going to reopen and how they are going to put the clock back to the days when BSC was operated on the basis on which they operated it.
The commercial judgments that I have given are some of the best news that has been given to people working in the Scottish steel industry for very many years and they reflect the advances that I have described.

Dr. Jeremy Bray: rose—

Mr. Clarke: I will give way to the hon. Gentleman in a moment. I am aware, of course, that a report published last week by the hon. Member for Motherwell, South (Dr. Bray), with the support of the local Labour party and his council, tried to cast doubts on the future of Ravenscraig. I have to say, as an Englishman who now makes frequent visits to Scotland, that I have the greatest difficulty sometimes in coming to terms with the nature of the Scottish political debate. The Scottish Labour party appears to thrive on trying to represent to the world that Scottish industry is in a desperate state of decline and is loss-making. When it gets the commercial assurances that I gave a moment ago, which I have described as among the best news that has been given to the population of Motherwell and west central Scotland for many years, the Scottish Labour party spends its time desperately trying to find someone who will cast doubts on the good news, no doubt to reinforce the unworthy position that it took in the last election when it tried to represent Scottish industry as on the verge of collapse and its members as the only rescuers of it. I see absolutely no point in members of the Scottish Labour party going to outside bodies which cannot have full access to all the commercial information available to BSC to try to rubbish good news about the commercial prospects of the steelworks.

Dr. Bray: Will the Chancellor acknowledge that the so-called undertaking, which reads:
Subject to market conditions, there will be a commercial requirement for steelmaking at Ravenscraig for at least the next seven years",

is not an undertaking at all, but an economic forecast? And, given BSC's forecasting record, does he think that it means very much?

Mr. Clarke: The previous three-year undertaking was subject to market conditions. Of course it is subject to market conditions. It is the best commercial judgment that can be made. There is no other sensible proposition to put forward. The hon. Gentleman has great expertise in economic policy and is one of the more erudite Members of the House. If he suddenly got to his feet and gave in ringing tones a guarantee about the future of an industrial plant regardless of market conditions and commercial considerations, he would destroy his reputation with me and with most other people. I should regard him as an idiot. Any politician who says that his political party can guarantee the future of an industrial enterprise regardless of market conditions is an idiot. Anybody who believes such a guarantee has only to look back over the history of nationalised and private sector companies in the last few years to know that such guarantees are worthless pieces of paper, given by people who do not understand how the steel or any other industry works.
The reason why I criticise the hon. Member for seeking to undermine what he calls the undertaking is that it is extremely good news that the management, which is in the best position to know and at the moment is the most successful management in steelmaking in western Europe, is able to give as its considered commercial judgment that it will require steelmaking at Ravenscraig for the next seven years — subject, of course, as any sensible management has to say, to market conditions remaining satisfactory.

Mr. Malcolm Bruce: In view of what he is saying, will the right hon. Gentleman acknowledge that his right hon. Friend the Secretary of State for Scotland gave a guarantee that he had an assurance that the mill would stay open for three years, and that he was very proud to boast about his record on that? It is well known that the management of British Steel wanted to close Ravenscraig. If it had done so, how could Ravenscraig now be there to contribute profits? Was not that guarantee necessary and beneficial to the steel industry?

Mr. Clarke: The assurance on which my right hon. Friend relied and, to the extent that I was pressed about it, I relied as well when I went to Scotland during the election, was subject—[Interruption.] No doubt I left a trail of devastation behind me, but on the assurance, I was on very sound ground. Not only was that three-year assurance expressly subject to market conditions, but it turned out, despite all the doubts heaped upon it by the Opposition, to be a valid assurance. It has been lived up to, to the deep disappointment of the Scottish Labour and Liberal parties. The assurance expired at the end of three years, but was replaced by the much better assurance that we now have, that Ravenscraig steelmaking is required, in the commercial judgment of the corporation, for the next seven years, so long as market conditions allow.

Mr. Salmond: With regard to the Minister's foray into Scotland during the general election, I seem to recall that on a previous occasion he said that it had substantially benefited the Opposition parties. The right hon. and learned Gentleman referred to worthless pieces of paper. Was he referring to such things as golden shares? Is not the


scepticism in Scotland regarding the Minister's seven-year guarantee for Ravenscraig based on a realistic assessment of the investment patterns in the steel industry, which most certainly leave Ravenscraig vulnerable?

Mr. Clarke: There is a £15-million investment going into coal injection plant at Ravenscraig at the moment. Investment decisions are best made by the commercial management of a company, having regard to its market needs and its judgment of the best way of serving them. The moment politicians of whatever party — Scottish National, Liberal, Labour or Conservative—start to get deeply immersed in the investment decisions of a corporation, one gets into difficulty. While this corporation continues to be nationalised, all major investment decisions above a certain size have to come to me and, unless there is some obvious flaw in them, naturally I shall tend to approve those proposals by the corporation between now and the date of flotation.
One thing that I shall certainly not do is start arguing with the corporation that its proposed investments should be altered for political reasons contrary to the commercial interests of the corporation, because I believe that, if it acts contrary to the commercial interests of the corporation, it acts contrary to the interests of the work force. If the work force at Ravenscraig looks at the assurances that it has had, which have been lived up to, it should be very cheered by the assurance which it now has of the seven-year future in the circumstances that we have given.
I do not think that the hon. Member for Motherwell, North is doing a service to British Steel or the Scottish economy as a whole by seeking to advertise the economy of his region as being much more fraught than it is in the judgment of the major employer in the town.
I have looked at the report, and it recommended that the Government should consider—and I stress that the recommendation was no more than that we should consider it — the separate sale of the plants at Ravenscraig, Dalzell and Shotton. I emphasise Shotton, because this is sometimes referred to as a separate Scottish privatisation. It is nothing of the kind. It is a Scottish and a part of Wales privatisation. Perhaps a Welsh hon. Member will catch your eye during the debate, Mr. Deputy Speaker, but I understand that the trade unions at Shotton are horrified by the suggestion. There is not much Welsh support for the amazing idea that Shotton should be swept into a separate company.

Mr. Barry Jones: Will the right hon. and learned Gentleman give way?

Mr. Clarke: As I have referred to the hon. Gentleman's constituency, I had better give way.

Mr. Jones: I can only say at this stage that if I am lucky enough to catch your eye, Mr. Deputy Speaker, I shall be able to give the House the view of the Shotton steel workers. I would rather it was me than the right hon. and learned Gentleman, but in the interests of brevity I must tell him that my steel workers wish very much to remain in one unit with the BSC if there is privatisation.

Mr. Clarke: That is rather as I thought, and the hon. Gentleman will be glad to know that that was my reaction to the report. We considered such an option—indeed a whole range of options for dividing the corporation up or

privatising it as a whole—in detail with our merchant bank advisers and with the British Steel Corporation before our initial decision to privatise it as a single entity. I am not questioning the bona fides of Arthur Young, which is a reputable and expert consultancy company. However, it did not have access to some of the commercial information. BSC could not be expected to reveal that information because it would have been of value to BSC's competitors had it leaked out—as tends to happen even with the best will in the world. Nothing in the report issued last week cast any doubt on the conclusion that we had already reached on the basis of the better information to which we had access—that it was in the best interest of BSC, its work force and, indeed, the taxpayer to maintain the corporation in its present form into the private sector. I should make it clear that it remains the Government's intention to privatise the corporation as a single entity.
The privatised British Steel will use its independence to respond even more effectively—

Mr. Donald Dewar: Before the Minister passes on from Ravenscraig, let me ask him whether the seven-year guarantee — perhaps assurance would be a better word — will be repeated in the prospectus of the company at privatisation?

Mr. Clarke: Subject to there being no sudden changes in market forces or commercial judgment between now and then, the answer is yes. We said when it was issued that it would in effect be reflected in the prospectus.
The privatised British Steel will use its independence to respond even more effectively to the needs of its customers. By doing so it will contribute enormously to the economy, through both its domestic activity and its export earnings. The British Steel Corporation belongs in the private sector and it is there that it will best prosper. The Bill represents a historic opportunity and I commend it to the House.

Mr. Bryan Gould: The Government's reasons for bringing forward legislation are often obscure, but never more so than in this case. None of the reasons advanced by the Minister, either today or on other occasions, stands up to examination. His difficulty is that the true reasons are reasons of dogma, partiality and cowardice, and therefore cannot be stated.
The Minister puts his case in terms of the industry's success. It is that success, he says, that now makes privatisation both possible and desirable. Yet that argument is a total non-sequitur. There is no causal connection between success and privatisation. Success has been brought about with no help from privatisation and does not depend on privatisation for its continuation.
The success is of course undeniable, and it is very welcome. In terms of productivity and profitability —though not in terms of output or market share — the steel industry has indeed recovered and is now among the most successful in the world. Let us be clear how that success has been achieved. It has been achieved at very considerable expense to the taxpayer and as the consequence of very great sacrifices and contributions by the work force.
The Minister declined to estimate in his statement of 3 December how much the taxpayer has contributed over recent years, but £5 billion seems a not unreasonable estimate and that is confirmed in a written answer given


by the Under-Secretary of State for Trade and Industry on 15 December. In other words, the public purse has provided the necessary investment on which the industry's recovery has depended. There is no way that private owners would have been willing or able to provide the money needed to carry the industry through difficult times and to emerge stronger at the other end. If public investment was the precondition not only of the industry's success but of its survival, experience, and particularly the experience of the past 10 years, also gives the lie to the argument that the industry cannot function efficiently under public ownership. It is precisely under public ownership that the industry has made its gains in productivity and efficiency. We do not need privatisation because essential improvements are still awaited. They have already been achieved, and it is not possible to argue, on the basis of experience, that they cannot be maintained or extended under public ownership.
As so often with the Government's privatisation measures in recent years, this privatisation is produced to take advantage of industrial and commercial success, not to provide it. The steel industry provides perhaps clearer evidence of that than any other. The history of the industry shows clearly that it is under private ownership that the industry gets into difficulties, fails to invest, takes refuge in price cartels and begins to operate against the public and national interest. Under public ownership it has made the necessary investment, put its house in order and begun to serve the national interest and guarantee its future; so much for the argument that privatisation is needed to grapple with the industry's problems.

Mr. Coleman: Would my hon. Friend like to contemplate how the British steel industry could have succeeded had we not brought into public ownership the 14 predecessor companies in 1967? Does my hon. Friend think that had those companies remained the British steel industry could have succeeded in modern conditions?

Mr. Gould: My hon. Friend is right. The investment record — in particular the investment record of those private companies in 1967—shows exactly what would have happened to the steel industry in the difficult conditions that it faced subsequently had it remained in private ownership.
If there is no argument from practicality, the Government's real reasons must be those of dogma—a belief in the principle, without reference to practical evidence, that it is simply wrong for the Government to be involved in the ownership and management of the steel industry. Yet that argument is equally unsupported by reason or practice. The notion that the Government can stand aloof from the future course of the steel industry is plainly nonsense. That is mainly because the industry is by its very nature extremely cyclical. Private owners will be very happy with their investment as long as the industry, its markets and profits are buoyant, but private owners quickly become disenchanted when the industry has to face tough times. It is then that the necessary investment fails to be made, and the industry gets into further trouble. Only public ownership provides the vision and long-term approach to make the counter-cyclical investment that is required.

Mr. Richard Holt: Will the hon. Gentleman say whether it is now Labour party policy to renationalise the steel industry after it has been denationalised?

Mr. Gould: Of course, I expected that question to be asked at some point, although it is wholly inappropriate to this part of my speech. However, for the reasons that I have yet to develop fully, Opposition Members and the trade union movement strongly believe that the steel industry is most appropriately owned in a form of public ownership. We shall decide that form and the order of priorities by which it is to be secured when we return to power and we have no intention of having our agenda dictated by Conservative Members this afternoon.
It is impossible to expect the private purse to finance the investment that the industry requires when the going is tough. That is inevitably so.
The industry's current and foreseeable need is for annual investment amounting to about £300 million. That can be financed at present levels of profits, but, as one of my hon. Friends said earlier, it would require only a slight change in market conditions or comparative costs to throw that into jeopardy.
The industry is cyclical because it requires substantial investment in expensive plant to compete, and it can provide a return on that investment only if it is used at or near capacity. If it is required to run below capacity for any length of time, unit costs rise alarmingly and profitability is immediately threatened. That threat occurs all too frequently because the industry is sensitive not only to movements in its own costs and to the intense competition which it inevitably faces, but to the level of demand in the industrial economy as a whole.
A cold summer can mean a lower than expected demand for tinplate because less beer is sold; an industrial dispute in the car industry can reduce demand for hot rolled coil; and that is to say nothing of such matters as movements in the exchange rate which, at the time of the 1980 steel dispute over a possible 2 per cent. increase in overall costs, managed to raise British prices by 40 per cent. over Japanese prices without anyone in the Government appearing to notice. Of course, the customer did notice.
That vulnerability to cyclical movements is exacerbated by the international, and particularly the EEC, context in which the industry has to operate. The EEC concludes in its latest report that there is still 30 million tonnes overcapacity in the EEC and that a further 80,000 jobs will have to be shed. The present reaction of the British industry is, understanably, to take the high ground—to say that in view of its present strength it is not dependent on EEC regulation of the industry and that it could well expect to survive and flourish in a free market. That is why the net of the quota system is widely welcomed, with our support, as providing a real opportunity for the British steel industry to make progress. There is certainly a powerful case at present for resisting any further pressure for cuts. We only wish that the Government had taken that line a little earlier because the British industry has already taken its medicine and a good deal more.
No one can be confident that the present advantages that we enjoy in terms of cost and efficiency can be maintained over a long period, particularly given the uncertainties introduced by privatisation. It is impossible to say that within a short time, for the cyclical reasons that


I have given, we shall not again be fighting for the industry's survival. In those circumstances, the notion that the Government can wash their hands of the industry, particularly at a time when other EEC Governments are becoming increasingly involved with their steel industries, simply cannot be sustained.
The question asked by my hon. Friend the Member for Workington (Mr. Campbell-Savours) is relevant and must be answered. What would the Government's attitude be if they found the EEC context and market conditions generally as adverse as they have been at certain times during the past decade? Would they stand by and refuse to intervene or, as some of us suspect, would they be forced, for the reasons that I am about to deploy, to renationalise the industry, as they have done in other cases, notably Rolls-Royce? We are again forced to the conclusion that private ownership is at best a fair-weather friend. The Government and the taxpayer will again be called to the rescue, in both an EEC and a national context, when the going gets rough, as assuredly it will.
We can be confident of that conclusion because the steel industry cannot be allowed, when in private hands, to follow the course which would normally be followed when an industry ceases to be viable. The steel industry may, as the Minister explained, no longer be quite the commanding height that it once was — many of its customers have since changed to other materials—but let there be no misunderstanding that it remains a fundamental underpinning of our industrial economy and of great strategic importance to our future development. It is unthinkable that it should be allowed to disappear, be substantially reduced in size or pass into non-British hands. The loss of a sizeable indigenous steel industry would be a body blow to the British economy and would render us incapable of providing from within our own resources the basic materials needed by our armed forces in time of war. Public ownership remains the only guarantee that the steel industry will be sustained.
If the Government's ideological prejudices provide no acceptable rationale for the measure, their other reasons are no less disreputable. The privatisation will provide the usual bonanza to private interests who, having allowed the taxpayer to pick up that sizeable bill for so long, will now step in and expect to pick up the profits. That is to say nothing of the huge fees and commissions for which City institutions are already queuing up and which they will expect to charge for their part in this charade.
It may be, too, that the Government are keen to privatise because they are anxious to put a privatisation programme, much undermined by the British Petroleum fiasco, back on the rails, politically and financially. But it can surely hardly be the case, given all the boasting about how much money the Chancellor now has at his disposal, that the sale is needed to raise the cash. But some explanation is required for the unseemly haste with which this privatisation has been rushed forward.
It is only a matter of months ago that Ministers and British Steel were talking of a three or four-year time scale for privatisation, following a well-established track record of profitability. What has happened to change that perspective and to produce the current urgency? Do the Government know something that we do not? Is some window of opportunity about to close? Why have past statements been so quickly jettisoned? The Minister looks

puzzled, but why is the measure now being brought forward with such haste when it was mentioned neither in the manifesto of less than a year ago nor in the Queen's Speech of a few months ago? We need some explanation for this sudden volte face.
It is for all those reasons that we believe that privatisation is a disastrous option to take. It subjects the industry to disruption and uncertainty at a time when it needs to build on the successes achieved by the present regime. It offers short-term profits to private investors at the expense of a fair return to the taxpayer and at considerable risk to the industry's future investment needs. Moreover, it does so without any measureable benefit to the industry itself. That is why we oppose the Bill. Let there be no doubt that we oppose the Bill outright. We shall fight it, with total support from the trade unions involved, throughout its passage through the House.
Quite apart from the threat to the industry as a whole, and the quite unnecessary jeopardising of its future, there is a specific threat to the future of the plants at Ravenscraig and Dalzell under the privatisation proposals. The Minister, in his statement to the House on 3 December, gave what he claimed was an assurance about their future. But, as has already been pointed out, a moment's consideration of what he said on that occasion will show that any apparent guarantee was illusory. He made it clear that the only firm guarantee about Ravenscraig runs out at the end of the year, in 10 months' time, and any further decision on its future will be made by the new private owners on commercial grounds and according to market conditions which they themselves, by virtue of their plans for reinvestment, or rather the absence of them, will largely control.
As I have already explained, the considerations to which the Minister is now prepared to entrust Ravenscraig and its future would have meant the closure of the whole industry at almost any time over the past decade. The only thing that has now changed is that the Government clearly hope that by divesting themselves of the industry through privatisation they will also succeed in divesting themselves of the political responsibility for what happens to it and its constituent parts. It is clearly the Government's hope that they will be able to leave to private owners and market forces a decision which, politically, they have been too lacking in courage to take themselves.
I must warn the Government that they will not succeed in that hope. Even if the Bill proceeds, I put the Government on notice that they will be held responsible for the future of the 11,000 jobs and £100 million worth of wealth-creating capacity in Scotland which depends on Ravenscraig. We shall not accept arguments to the effect that those issues are entirely a matter for commercial judgment. They remain issues of the greatest importance to the economic well-being of a whole community and as such their resolution is the Government's responsibility. That community, with the full support of the Labour movement, will fight, both politically and industrially, to save the plant, the industry and those jobs, and to make the Government face their responsibilities.
If the Government think that they can shuffle off their responsibilities by claiming that the decisions are for private owners and have nothing to do with them, they have another think coming. [Interruption.] The Minister may say that that is an empty threat. We shall see, but the fact that he can use such a phrase shows very well what is in Ministers' minds.
We want to know what the Minister will do when, as is all too clearly presaged in the weasel words of his 3 December statement, the private owners propose to close Ravenscraig. We want bankable guarantees, which the Minister ought to give now, on the maintenance of those plants and the reinvestment programmes that will be needed to keep them viable. Other specific questions need answers. The Minister has provided at least partial answers to some of the questions that I intended to raise, particularly on the writing off of debts, and I shall be interested to pursue that with him in Committee. However, there are other questions to be answered.
What provision is to be made to ensure that control of the industry remains in British hands? Is the Government's apparent indifference to the issue on the same level as their indifference to the growing Kuwaiti stake in BP, or does the Minister accept the strategic argument that makes British ownership and control of the industry essential in our industrial and defence interests? If so, what does he propose to do to safeguard the position? He has said nothing about that today. Will it be a golden share, or is the experience with Britoil too painful to repeat? Will he take a Rolls-Royce solution and fix a limit for foreign shareholdings, at 15 per cent. or a similar figure —something he appeared to rule out on 3 December?
What has been done—this question was raised by my right hon and learned Friend the Member for Aberavon (Mr. Morris) —to safeguard the pensions interests of the work force? Is there to be a rejigging of pension arrangements to suit the interests of new private owners, as we have seen in some other privatisations? What date is proposed for the flotation, and what form will it take? What is to be said about EEC quotas in the prospectus, and what will be the initial target investment level? The Government's plans for the industry — I assume that they must have plans—are meaningless unless we receive some answers to those questions.

Mr. Campbell-Savours: Will my hon. Friend also press the Minister vigorously about what will happen if the new company starts to make losses? The national interest is at stake. Steel is a strategic industry, and I feel that we are entitled to know what will happen to it. Will it be allowed to go to the wall in sectors in which the product is of strategic importance, or will the Government intervene? If they do intervene, in what form will they be willing to do so? They must have considered those matters in advance.

Mr. Gould: My hon. Friend is right. This is the nub of the issue, and we have yet to hear anything sensible, helpful or constructive from the Minister on what is a vital and central problem.
We also need to know what safeguards will be provided for consumers and steel interests against unfair exploitation by British Steel in private ownership of its near monopoly. What guarantee will we have that British Steel will not become more and more a steel importer and marketer, rather than a steel producer?
The Bill is the product of suspect ideology, political cowardice and the Government's familiar readiness to provide goodies for their friends in the City at the expense of those whose livelihoods depend on a continuing and thriving steel industry. It is a product of a typically short-term attitude—the attitude that says that it is right to cash in on short-lived profitability rather than to make long-term provision for the industry's investment needs. It

is the product of a cavalier approach to national security and to our industrial future, and of a blind faith in market forces which, as bitter experience should by now have taught us, is a recipe for disaster. It is because we care about our industrial future, about the steel industry and, above all, about those who work in it and have made such a contribution to its current success that we will oppose the Bill.

Several Hon. Members: rose—

Mr. Deputy Speaker (Sir Paul Dean): Many hon. Members with strong constituency interests are hoping to speak. I appeal for brief contributions.

Sir Giles Shaw: It is interesting to hear the hon. Member for Dagenham (Mr. Gould) give such a weighty address about his views on nationalisation, denationalisation or renationalisation. I wonder whether he would use the same language when speaking to the Ford motor company in his constituency to find out its views on the long continuity of employment—to which, no doubt, he is wholly devoted.
It comes ill from the hon. Gentleman to castigate the Government, and to accuse my right hon. and learned Friend the Chancellor of the Duchy of Lancaster of dogma, partiality and cowardice, when we have just heard a fine demonstration from the hon. Gentleman of all three. My hon. Friend the Member for Langbaurgh (Mr. Holt), in a telling intervention, asked the hon. Gentleman what kind of policy he would pursue. I think that we can agree that the hon. Gentleman genuflected to dogma; he certainly referred with pride to nationaliation as a major part of the historical development of British industry. He was clearly partial as well, because he gave a partial response to my hon. Friend by suggesting that there would be some kind of public ownership, and he showed complete cowardice by refusing altogether to give any cast-iron assurance or guarantee on what exact form of public ownership would be used.
We have heard the Opposition Benches erupting into enthusiasm to try to obtain some kind of copper-bottomed guarantee on the future of a certain steel works in a certain part of the United Kingdom. I think that the hon. Member for Dagenham has let the side down pretty badly in entering the debate with a series of half truths. Not a single Scottish voter will sleep safely in his bed, wherever it may be.
My right hon. and learned Friend the Chancellor of the Duchy of Lancaster has brought a most important measure to the House, and I congratulate him on his courage in doing so. He is wholly right not only in what he seeks to do, but in the manner in which he seeks to do it. It is amazing that the transformation of the British Steel Corporation has achieved such a turnaround from a scale of loss to a scale of profit unmatched in the private sector during a comparable period. I echo the view expressed on both sides of the House, as well as by my right hon. and learned Friend, that that significant achievement was only partially due to the Government's policy towards the British Steel Corporation. It was largely due to the fact that the management and work forces in the various plants took on board the crucial importance, following the lean and desperate uncompetitive years of the 1970s, of refashioning their operation—of going for productivity,


customer satisfaction, price and investment. The management of BSC, led vigorously and effectively by chairmen of various kinds, have brought the company to its present profitable state.
I must pay a particular tribute to the corporation's existing chairman, the old anvil-hammerer of Wagnerian opera Sir Robert Scholey. Even he must now feel that the achievement of a privatised corporation is within his sights after so many years of trying.

Mr. Coleman: Let me put to the hon. Gentleman the same question that I put to my hon. Friend. How does he think that the achievement would have been possible if the 14 companies that were taken into public ownership in 1967 had still been operating in the industry?

Sir Giles Shaw: I think that the hon. Gentleman has provided the answer to his own question. Obviously, if those 14 companies had not been taken into public ownership, there would not be a Bill taking their ownership back into the private sector. I am quite willing to argue with him that the 14 companies might well have been replaced by 24 other companies specialising in the production of British steel and services.
We have to satisfy Opposition Members on the question whether the security of state control will somehow guarantee jobs and development to a greater degree than would the private sector. Sir Robert and his team have now reached a point at which it is possible to privatise the corporation, and I am glad to learn from my right hon. and learned Friend that that could happen in months rather than years. The sooner it happens, the better.
I pay tribute to my right hon. and learned Friend for deciding to privatise the corporation in whole. The British Steel Corporation, as presently constituted, is a major asset for the United Kingdom. However, its prime role in the marketing of steel and steel products is essentially not a United Kingdom role, but a European and international role. The only future for the British Steel Corporation, whether in public or private hands, is to be able to compete Europe-wide in a market that is sufficiently large for the corporation's present share to look comfortingly towards successive periods of growth. If my memory serves me correctly, it has a 2 per cent. share of the European steel market—that is a low share.
From the point of view of the corporation's future— I trust that it will be in private hands—Europe will be where its future competitive growth will mainly lie. There are two reasons for that. The first is the huge contribution that has been made by the work force and the management to restructure the corporation from within. The second reason relates to the consequences of those ghastly years of contraction, of obsolete plants being closed and, if my memory serves me right, of the loss of more than 50,000 jobs from the numbers employed in the heydays of the 1970s. All that has left the British corporation with a much higher rate of productivity and competitiveness than any of its European competitors. However, its only prospect of competing in the European Community is to maintain its present scale of operation.
I hope that none of my hon. Friends disputes the principle of the Bill. It would be sheer folly to divide and break up the corporation from its present size. Looking around the European market, at the giants of Thyssen and

at the French and Italian companies and beyond them to Nippon, Pittsburgh and Bethlehem, one sees that those huge companies have grown to significant sizes and it is not possible to compete with them in the international arena for steel products and steel production unless the United Kingdom component is of a comparable size. Therefore, the single structure that my right hon. and learned Friend has chosen is the correct one.
I believe that the window of opportunity to which the hon. Member for Dagenham was looking is crucially to be observed. It is a window through which to see that as we move to a termination of the quota system within the European Community, the British Steel Corporation, in private hands, will be able to develop a significantly increased share of the European market. I must press my right hon. and learned Friend on the European issue. Obviously, I understand that that will be more closely addressed in the following debate, but perhaps my hon. Friend the Under-Secretary will at least say that the background to the Bill must be that the steady and, I trust, orderly return to a market in steel and steel products in the European Community should be the proper context in which a privatised corporation can work. If that context is not both orderly and sensibly arranged, it will be difficult to make full use of the new assets that we possess in a steel company with high rates of productivity, competitive prices and a much improved product basis.
I sincerely hope that the development of a free market in steel will be accompanied by significant reductions in overcapacity of other member states. As the hon. Member for Dagenham rightly pointed out, the British Steel Corporation has substantially reduced its overcapacity in past years. With the possible exception of rolling mill overcapacity, it has eliminated all the overcapacity that previously existed, at vast cost to the taxpayer and vast sacrifice to its work forces. If we are to move successfully into the private sector, it is crucial that the European market for steel should likewise address itself to its overcapacity before the British Steel Corporation can rightly look forward to a more profitable future.
We face somewhat difficult positions in relation to debt and accumulated profit and loss. I understand my right hon. and learned Friend's point. I recall that the European provisions on competitive practices are such that a significant debt write-off might be seen as anticompetitive. However, I beg my right hon. and learned Friend to examine more carefully British Steel's position in terms of both accumulated debt and accumulated loss to see whether there is a formula whereby some of the indebtedness from either side can be reduced prior to placing the corporation in the market.
I would not wish shareholders or investors to find that their first act might be trying to write off from generated revenue huge amounts of accumulated loss. They may well make application for a redress of the balance sheet, as my right hon. and learned Friend suggests, but if this is a form of privatisation, it is a pretty miserable form of privatisation which has an albatross of that size slung round its neck.
In my judgment, the Bill is correctly timed. It is the correct decision. It is not a decision based on simple dogma or even on the expediency which the Government may have wished to use when finding themselves with a corporation on their hands which has made profits so


rapidly. It is in the correct order of magnitude that the corporation should take its place among the largest private steelmakers in the world. I wish it well.

Mr. Bruce: If my calculations are correct, the Bill represents the fifth change of ownership for the steel industry in just over 40 years. Therefore, in some ways the House may not be surprised when I say that I hope that it will be the last, although some of the questions raised suggest that it may not be quite as definitive as that. It is apparent that the Bill has been brought forward in something of a hurry compared with the original proposals, for reasons that have not been fully explained to the House, other than that the industry now appears to be in profit and, of course, the privatisation of electricity looks like slipping further down the schedule, and the Government wish to ensure a rolling programme.
Speaking after the hon. Member for Pudsey (Sir G. Shaw), it is worth recalling that profitability has been achieved at a substantial price. That price would not have been freely available to a private sector corporation. I am referring to the public write-off of a £3·5 billion debt, which has been accompanied by dramatic reductions in capacity and in the work force. The British Steel Corporation employed 24 per cent. of the total number of people employed in the steel industries in the European Community in 1975, but now accounts for only 14 per cent. of employees. That demonstrates the degree to which the British Steel Corporation has reduced capacity at a far faster rate than any of our European competitors. If it is any small consolation to the Chancellor of the Duchy of Lancaster, that is why I wholeheartedly agree with him that we have carried our share of the cut and should not have further quotas imposed upon us. Indeed, we should be able to benefit from a lifting of quotas which, I hope, will proceed rapidly.
It is a fair reply to the interjection from the hon. Member for Langbaurgh (Mr. Holt) to say that it is a reasonable challenge to the Labour party to ask whether it would renationalise the British Steel Corporation. It has certainly never been our view that one should wish to commit to change and to reverse policies for ideological reasons. However, the House must confront the possibility that the steel industry is crucial to the bedrock of our economy. What would a Conservative Government of the present complexion do if, after the flotation, given the considerable difficulties that steel has faced nationally and internationally over the years and the investment that has taken place, especially in Third world countries, our privatised steel corporation got into substantial financial difficulties?
I agree that nationalisation is not the only solution. However, I hope that whoever replies to the debate will give the House an assurance that there is a recognition that the strategic core of steelmaking capacity must be retained. I agree absolutely that ideally, in all reasonable circumstances, that core should be efficient, profitable and successful, rather than dependent on subsidies and acting regardless of proper rules of economic efficiency.
The reductions that have taken place mean that the British Steel Corporation now employs 59,000 people—that figure is a little out of date and the actual number of employees may have dropped —compared with 184,000 in 1975. The corporation produces about 12 million tonnes, although a 14-million tonne capacity is its stated

aim. However, it accounts for only 2 per cent. of the European Community market and that is obviously well below the target that we hope it may achieve. Such are the general circumstances in which the Bill has been introduced.
We are also left with the problem of the carry forward of a £700 million deficit which has not been written off. Against the background of an external financing limit of minus £300 million, which suggests that the corporation will not, apparently, be allowed to carry forward a profit against the accumulated deficit, is the Minister satisfied that the rather complicated formula that he explained to the House meets the European Community requirements? I believe that that formula is rather transparent and I am not sure that our European partners will be ready to accept it. However, if that is the case, obviously it is proper that anyone buying shares in the new corporation should do so in realistic circumstances rather than simply writing off the accumulated debt.
Inevitably, representing a Scottish constituency, I speak with some concern about BSC's operations within Scotland. Indeed, the reasoned amendment tabled by my colleagues and to which I have put my name makes it clear that our main concern is not with the principle of the sale of the steel corporation, but with the future of the industry in Scotland and the rights of the employees to ensure that they have a substantial stake within it. I was rather disappointed that the Minister, in his fairly long opening speech, did not address himself to that problem. I believe that the opportunity for the employees to secure a substantial stake is something which the steel unions and the employees rightly expect. I hope that such terms will be offered and will be attractive to ensure that those employees secure a substantial stake.
I was interested in what the Minister said about the future of Ravenscraig and the future of the Scottish steel industry. If I interpreted him correctly, he said that the Secretary of State for Scotland's proud boast that he had used his influence to secure the future of Ravenscraig through a given period — conveniently, during the last general election — was a worthless guarantee. The Minister said that his right hon. and learned Friend's guarantee was not what he had claimed it to be and that had he been Secretary of State for Scotland — God forfend — he would not have secured such a worthless guarantee and nor would he have made such a substantial claim for it. At least we have no reason to complain that we do not understand the Minister's position.
The Minister should be aware that within Scotland there is much concern—private and public—about the sustained hostility demonstrated by the management of BSC in general and by the current chairman in particular to the continuation of Ravenscraig. It can be argued that, if the Secretary of State for Scotland's guarantee is significant and if he succeeded in persuading BSC not to close Ravenscraig, that plant would not otherwise be operating to make a contribution to the profitability that has enabled the Government to introduce the Bill. That being so, it is a little rich to expect the Scottish people and the Scottish steel industry to regard the qualified guarantees that have now been given with any great confidence.
When the Select Committee on Trade and Industry investigated Ravenscraig it uncovered accounting methods used by BSC to undermine the apparent profitability of Ravenscraig. The Chairman of that


Committee said that once that information was unearthed it was a dead give-away of the management's objective: to undermine the apparent viability of the mill and secure its closure.
It is hardly surprising that the guarantees and assurances that have been given have a hollow ring to most people in Scotland. I believe that we are entitled to ask the Government to consider how we can overcome such reservations, given that the existing management has shown such hostility.
I do not wish to give a definitive solution—I accept that the hon. Gentleman representing Ravenscraig has put forward his own solutions; the Arthur Young proposal is one of them—but I believe that there are four options for the Scottish steel industry. A link between Shotton and the Scottish steel industry is one such proposal. I accept that the employees of Shotton may not be so keen on it. If that is the case, I suggest that an alternative option is to explore the viability of an independent Scottish steel company. I am not suggesting that that is the ideal approach, but such an independent company might be preferable to privatising the whole of BSC, whose management is committed to having no Scottish steel company.

Mr. Barry Jones: I know that the hon. Gentleman is speaking as a good Scot, but I emphasise that my people at Shotton see themselves as Welsh people and they want to be associated with their sister plants of Llanwern and Port Talbot.

Mr. Bruce: I recognise the hon. Gentleman's argument and I am aware of that dimension. The Shotton link is a possibility, but obviously such feelings would count against it.
I believe that the third option is for the Scottish company to be part of another European company, which would ensure a degree of competition. The fourth option, as the previous chairman of BSC mooted, is for the Scottish steel industry to join with a non-European company.
I am not suggesting that such options represent perfect solutions, but I find it rather depressing that the Minister is anxious to ensure that we privatise BSC in its entirety without exploring alternative ways, within the right hon. and learned Gentleman's ideology, to ensure that the Scottish steel industry has a viable future with a management committed to its survival and providing it with investment. While such a commitment is not apparent, I believe that it is difficult for anyone who is genuinely concerned for the Scottish economy to support the Bill.
The loss of a steelmaking capacity within Scotland does not only represent the loss of another few thousand jobs, but would tear the heart out of an already devastated economy. It is estimated that 5,400 jobs are directly involved with the steel industry and a further 2,000 depend indirectly on it. Indeed, many thousands more depend on the wider influence of that industry. British Rail, for example, is extremely dependent on the revenue it receives from steel operations in Scotland, as are other forms of transport and haulage. Against that background, a requirement to ensure the continuation of that industry should be regarded as paramount by any responsible Government. I agree that there may be several ways of

achieving that continuation, but I am not convinced that what the Minister has offered is likely to prove the solution.
There is another national circumstance that must be considered. There is clear evidence that BSC, in its enthusiasm—

Mr. Kenneth Clarke: The hon. Gentleman does not appear to be adducing any commercial or industrial argument against the proposal that BSC should be privatised as one entity. He appears to be founding his doubts against the proposal on the proposition that the present management is, in an unreasoned way, hostile to Scotland. I assure the hon. Gentleman that in all my contacts with the management I have detected no such sentiment. The present chairman and management of the corporation have issued their commercial judgment about its future. It would be most unwise to seek to fragment the corporation simply because of deeply held views in Scotland — with no basis in practice — that the management are hostile to the Scottish steel industry.

Mr. Bruce: I believe that that confirms what was said by the hon. Member for Banff and Buchan (Mr. Salmond) as to why we should encourage the right hon. and learned Gentleman to make frequent visits north of the border. His lack of understanding of the situation certainly ensures that his remaining colleagues who represent Scottish constituencies will be rapidly extinguished from the House.
The record of the past three years demonstrates that the right hon. and learned Gentleman's argument is not true. If it was, the Secretary of State for Scotland would not have needed to secure guarantees and boast about them the length and breadth of Scotland. I am afraid the Minister cannot understand the depth of feeling about this matter.
One argument that may ultimately work in favour of the Scottish steel industry within the BSC—indeed it is already working to our advantage and has enabled a "qualified" assurance to be given—is that the mill that BSC wishes to close is now contributing significantly to the viability and profitability of the corporation. If that mill were closed, British Steel would be relying, even on its present targets, on 100 per cent. capacity from the remaining mills. Everybody acknowledges that that is not attainable.
In addition, if the British Steel Corporation's ambition is to secure an expanding share of the European market, it needs to invest in Ravenscraig to show that it recognises that that capacity is required. Hon. Members representing Scottish interests would start to have confidence in the British Steel management if the substantial investment required came forward. Investment is not an absolute guarantee and the sum mentioned by the Minister is merely an ongoing commitment rather than a long-term assurance.
The Government have failed to acknowledge the significance of the development for Scotland or to take account of the interests of the work force. They have not come forward with any imaginative ideas as to how the work force could be given a significant stake in the industry. I do not believe that changes of ownership per se are critical, but the Government are pursuing a hurried measure which they have not thought through and my colleagues will vote against it.

Mr. Allan Stewart: I am sure that the House was on tenterhooks, waiting until the end of the speech of the hon. Member for Gordon (Mr. Bruce) to discover which way he was going to vote. As I understand it, at the last general election, the alliance manifesto was in favour of the privatisation of the steel industry. It may simply be a question of the usual problem of achieving agreement among the various parties for which the hon. Gentleman spoke.
I agree with the hon. Gentleman on one point—the importance of employee share ownership. Clearly, that has been an important part of the success of privatisation. My right hon. and learned Friend the Chancellor of the Duchy of Lancaster rightly said that we are considering an industry that has shown a remarkable turnround in recent years. That is a tribute to the management and work force of the steel industry. For example, we now have one of Europe's few profitable steelmakers. A few years ago, the industry cost the taxpayer £5 million a day. The number of man hours per tonne of liquid steel has improved from a figure of 14·5 in 1980–81 to a figure of 6·2 in 1986–87 and, in the past six months, there has been a further improvement to a figure of 5·4.
Those improvements and the resulting reduction in costs have been shown in the performance of the entire corporation, including the three integrated hot rolled coil works at Port Talbot, Llanwern and Ravenscraig. Those improvements have been due to two factors—investment and new technology, and the spirit of competition which has clearly been a major factor in driving down production costs.
The forecasts made in respect of Ravenscraig and Dalzell are clearly valuable. They state that the hot strip mill at Ravenscraig, and the other mills, will continue in production at least until 1989, that steelmaking at Ravenscraig and plate rolling at Dalzell will continue for seven years and that, if British Steel wished to close Ravenscraig, it would consider any wholly private sector offer for the facilities. However, whether we consider them politically or as an expression of the corporation's commercial forecasts, they are valuable statements. In inevitably changing market conditions, few companies would be able to make such forecasts.
What is the best guarantee for Ravenscraig or any other steelworks? Part of any such guarantee is a management committed to the success of a particular enterprise. I do not go so far as the hon. Member for Gordon, but there have certainly been suspicions, justified or not, in the Scottish steel industry. Privatisation has brought to other industries, and can bring to the steel industry, substantial advantages of full commercial freedom and wider employee share ownership.
There has been some debate about the Government's intention to privatise BSC as a single entity. BSC is not a monopoly because of the level of imports and because it will operate in an increasingly free European market. I hope that Ministers will recognise that a number of people from different political viewpoints have questioned whether that is necessarily right. The proposal that Ravenscraig, Dalzell and Shotton be privatised as a separate company is not one that can be simply thrown to one side. It is not a proposal to privatise the Scottish steel industry, as the hon. Member for Gordon suggested. It has not been suggested by those who put forward the proposal

that the tubes division of Clydesdale and Imperial steelworks would be privatised along with Ravenscraig and Dalzell. That would not make commercial sense.
The hon. Member for Motherwell, South (Dr. Bray) and others will no doubt speak with greater expertise on this subject. The Arthur Young team did not have access to the commercially confidential information held within the BSC. I do not criticise BSC for that, but there is still a case to be answered. It is not sufficient for the Government to say that they have all the secret figures and that those figures disprove the case. One needs a rather better defence than that.
I do not claim sufficient expertise to be able to say whether those proposals are necessarily commercially sensible. It might be commercially sensible to privatise Ravenscraig, Shotton and Dalzell separately. That might be sensible for the Treasury and it would certainly be in line with the Government's competitive philosophy. Clearly, there would be more competition in the industry. That might result in two companies which would have the same access to international associations, technology and marketing outlets, so it might not be a zero sum gain. There might be genuine benefits.

Mr. Barry Jones: My nightmare is that I may not catch your eye, Mr. Deputy Speaker, before the debate is over. When I spoke to the leaders of the steel workers in Shotton, they said that if the industry is to be privatized—and they do not wish it to be so—they wish to see the corporation remain as one unit and they want Shotton to play its part there. I apologise for intervening. I know that the hon. Member for Eastwood (Mr. Stewart) has to make a case, but I must also provide a voice for the steel workers in my constituency.

Mr. Stewart: The hon. Member for Alyn and Deeside (Mr. Jones) is right to make that point. Inevitably, that is the initial reaction from Shotton. There might be considerable benefits for Shotton from the arrangement proposed. I do not claim that that is necessarily the case, but there is a case to be answered. I hope that when my hon. Friends on the Front Bench ask the officers in their Department to examine these proposals — including some of the suggestions made by the hon. Member for Gordon — they will not adopt a policy of asking how best they can shoot them down. I hope that the proposals will be looked at in a reasonably open-minded way.
I have no doubt that the time is right for my right hon. and learned Friend to bring forward this Bill. As the steel industry moves towards the challenges and opportunities of the private sector, we must, however, ensure that the structure is the right one for its long-term prospects, its customers and its work force.

Mr. Michael Foot: I know that many of my hon. Friends are alarmed about the effects of what the Government are doing on their constituencies. I want to express the alarms of my constituents about what could happen to the industry for the reasons most admirably stated by my hon. Friend the Member for Dagenham (Mr. Gould) at the beginning of the debate.
Whatever else is to be learnt from the past 20 or 30 years about the steel industry, it is clear that it cannot be left to have its whole status and future determined by market conditions—yet that is what the Government are


risking. They have not answered that major point yet; indeed, there is no answer to it. Anyone looking back over the past 20 or 30 years will see the strength that the industry has been given by public ownership and the weakness that has been caused by trying to leave it to market forces. That does not mean to say that the Steel Corporation does not have to take account of market forces—of course it does—but it must do so in a proper context. The Government's Bill does not do that.
It so happens that I was introduced to the steel industry by Henry Spencer, a man who really knew something about steel, when I went to Ebbw Vale in 1960. He taught me everything I know about it, and about how private industry and public industry could co-operate. He taught me how necessary it was to have public backing and support when the steel industry had its back against the wall. He was also a great expansionist and believed it was essential that Government backing should be forthcoming so that the industry could properly expand. It was chiefly under his inspiration that the Llanwern works were built in Newport. I know that there was a lot of controversy about whether Ravenscraig should have gone ahead at the same time, but we in Wales certainly owed a great debt to Henry Spencer, to those who backed the project and to the works at Newport. The great victory in the industry that the Minister is celebrating today owes much to the foresight, investment and vision of the workers and managers, and of leaders such as Henry Spencer who wanted an expanding industry with the strength and backing in difficult years—as well as in prosperous ones—to enable it to grow.
The right hon. and learned Gentleman's account of what happened in the 1970s was a travesty of the facts. He spoke of us steaming ahead to the buffers with no interest in what was to come. We wanted to secure an intelligent pace of changeover from the older industry to the newer. We knew that changes had to take place but we believed that if that were done properly we could be saved from the ravages that had occurred in the previous industrial revolution, when great industries were allowed to sink into decay and nothing was done to build up other ones at the same time. When we were faced with the rundown of the industry, thanks to public ownership we were able to make intelligent plans and to prepare for the future. That is what we wanted to do in all the great steel towns up and down the country.
Unfortunately, our chance of doing this on anything like a scale on which it should have been done was wrecked. When the Government came to power in 1979 they did nothing about steel. All they knew was what they had been told by the present Secretary of State for Wales, who had introduced a far more expansionist plan at the beginning of the 1970s—but they write that out of the history books now. In 1979 the Government arrived and wrecked our regional policy, cutting down the enormous grants that we believed were necessary by so much that the amounts of grant that we were giving to make the changeover in the steel towns are being written out of the records now. When the Secretary of State for Wales gives us figures today he tells us that we cannot take account of the £40 million that we put into Ebbw Vale to make the changeover in those days. So the idea that we were not

trying to carry through an industrial changeover is nonsense, and the Minister should not dare to speak to the House in those terms.
We tried to carry out the change on a proper basis; we were carrying it through; and the Government who came in in 1979 wrecked it in one place after another. Shotton and all the other places quoted in the debate today were afflicted by the savage way in which the Government applied market conditions so ignorantly and ineptly in 1979, 1980 and 1981. If anyone seeks an authority on that, I tell him to go and ask the present head of the steel board, Sir Robert Scholey. He is a fine fellow and should have been appointed to the job seven or eight years ago. We would have been much better off if we had had him, instead of having to pay the huge sums that were paid to Mr. MacGregor to come in. I remember going to see Mr. MacGregor when he first came to run the industry. He told us that he could not be bound by the previous undertakings of the British Steel Corporation. Also, he did not want to have anything to do with building up new industries. He was opposed to the scheme that we, in the Labour Government, introduced for British enterprise. It was a way of trying to introduce other industries, with all the backing, knowledge and expertise of the Steel Corporation available to them. The Labour Government devised a fine scheme, but MacGregor said that he did not want it; everything should be done by the Government, and it was none of the business of the Steel Corporation.
I am glad to say that other persuasions eventually succeeded, and a similar pattern for building up new industries was then introduced into the coal industry by MacGregor on the instructions of the Government, who had to tell him how to do it. We had to deal with all these problems throughout the 1970s, and very difficult problems they were.
I am glad, as I am sure all those in the steel industry areas are, that the publicly owned steel industry has come through the fire as well as it has done. But it is at a much lower level than it was before, as my hon. Friend the Member for Dagenham said. Sir Harry Spencer would never have dreamt that one would call successful an industry that was producing only 15 million tonnes, or whatever the figure is. Of course, the amount could be far greater if the Government had given the steel industry the support they should have given it over a much longer period. I had hoped that they would be willing to do so now, but the Bill offers us no such hope.
I ask the right hon. and learned Gentleman what guarantees he can give. He can give none, because he is handing over the business to someone else. Can he offer guarantees of the sort that we gave Ebbw Vale during the rundown of 1976 and 1977? We put £70 million then into the new tinplate plant. It is partly because of that that it enjoys the profits it now has, which have contributed to the profits from the rest of the industry. That is the sort of investment that was put in back then and we need that sort of investment again now in Ebbw Vale to sustain and expand our tinplate finishing plant.
The same applies to the steel plants that are represented by my hon. Friends. They all want to know how they will be able to obtain the necessary amount of investment in the future. It is a question not only of guarantees for Ravenscraig—although I am all in favour of that being clarified—but of how a range of different steel plants will receive their investment in the future. It is an industry


from which one does not receive short-term returns or short-term profits; one must have long-term reports and long-term investment to secure the improvements about which the Minister is now boasting.

Mr. Kenneth Clarke: The right hon. Gentleman is talking of a much bigger steel industry, 10 years after the problems that he and I have been describing. Is he asserting that 15 million tonnes is not enough? Does he realise that 32 million tonnes of excess capacity has been taken out of western Europe over the past seven or eight years, yet there is still excess capacity? Does he not recognise the damage that has been done in the past by plucking these fanciful aims of bigger capacity out of the air and then investing in completely non-viable steel plants?

Mr. Deputy Speaker (Mr. Harold Walker): Order. I suggest to the Chancellor of the Duchy that some of these points could perhaps be dealt with by the Minister who replies to the debate.

Mr. Foot: The right hon. and learned Gentleman has given a completely false account of what we propose and of what has happened. We have not campaigned for a much bigger steel output. The campaign for bigger steel output was conducted by his right hon. Friend the Secretary of State for Wales when he introduced his so-called plan in 1972.
It is not a tremendous feat to say, "We have an industry that is now producing 15 million tonnes." We could have produced more than that in any case. I hope that there will be proper provision for an expansion of the industry, which is something that nobody can calculate.
Only the insane Government of 1979, 1980 and 1981 could have inflicted such damage on the rest of our industry that the cut in steel demand was so excessive. There was a collapse in our motor industry. Much of British industry was allowed to collapse or was driven to the wall by the appalling exchange policy of the Government. The Government inflicted the biggest single injury on the motor industry. Some Conservative Members—not the right hon. and learned Gentleman—know something about the motor industry.
British industry was devastated, which is why the changeover in the steel industry was made all the more difficult. I am gratified, as are many others, that it has come through all those problems. All credit should be given to the workers and trade unions, who were able to carry it through. As I have already said, credit should be given to Sir Robert Scholey, who has been the real manager of the industry and who should have been appointed at the beginning, instead of bringing a fancy manager from across the Atlantic and paying him hundreds of thousands of pounds to mess up the industry before moving on to mess up the coal industry. If Conservative Members want to criticise what I am saying about Sir Ian MacGregor they should consult their right hon. Friend the Secretary of State for Wales, who was subjected to a long visitation from Sir Ian MacGregor.
The Government are unable to tell us how they will be able to guarantee a proper future for those steel workers who made such sacrifices and for the industry, which has come through all those difficulties. Much better prospects should be ahead for the industry. However, the

Government cannot say anything about this matter because they are handing it over for somebody else to deal with.
The tests in the future will not be those that we quite rightly applied in 1976, 1977 or 1978—the tests for the long-term future of the industry which have led to the present levels of productivity. The Government are handing over those decisions to a few entrepreneurs private capital — to make the decisions. They, like the old steelmasters, will not have any objective view of how they will serve the long-term interests of the nation.
That is what the Bill is about, which is why it is such a disgrace.

Sir Anthony Meyer: The right hon. Member for Blaenau Gwent (Mr. Foot), giving one of his inevitable performances as the Phantom of the Opera, carried us back to the heady days of 1963 when the British Steel Corporation's 10-year strategy for an output of 33 million tonnes was denounced by the Labour party as miserably inadequate.
My right hon. and learned Friend the Minister may be relieved to learn that I wholeheartedly support this measure. I say that as no doctrinaire partisan of privatisation. I still require to be convinced of the case for the privatisation of the water industry. I still have strong reservations about the apparent methods that the Government will use to privatise electricity. Furthermore, I am deeply suspicious of attempts to fatten up industries to make them more attractive to entrepreneurs. The steel industry is a conspicuous and welcome example of the opposite. It has been not fattened up but slimmed down to prepare it for privatisation.
I have not been altogether happy about the game of ping-pong that has been played with the steel industry in the past. First, it was nationalised, then denationalised, threatened and then threatened the other way. The world has moved on, and Socialist parties, with the exception of the British Labour party, are recognising the enormous advantages that can accrue from privatisation to workers in those industries. In that regard, we have the recent example of the National Freight Corporation, the privatisation of which has brought immense benefits to those who work for it. That particular debate, as my right hon. and learned Friend the Minister said, is over.
The hon. Member for Workington (Mr. Campbell-Savours)—who is no longer present in the Chamber—made a valid point, of which I know the hon. Member for Alyn and Deeside (Mr. Jones) is well aware, about the problems that arise when an industry is slimmed down to make it more efficient, resulting in enormous losses of jobs and the very large interval that occurs between the process of slimming down and the arrival of replacement jobs. In that context, I am not surprised that hon. Members representing Scottish constituencies express great anxiety about the future of Ravenscraig.
I should like to mention the experience that we went through in north-east Wales; I know that the hon. Member for Alyn and Deeside is particularly concerned with this matter. The hon. Gentleman put up a heroic fight on behalf of his constituents for many years to try to maintain steel production at Shotton. I, from a constituency that at that stage closely bordered Shotton, gave him what support I could. The hon. Gentleman's


reward has been reflected in the majorities that he has managed to maintain over a series of elections. He earned the grateful thanks of his constituents.
I am not criticising the hon. Gentleman — he will know that I have made this point before—when I say that in the long run he and I did a bad service to our constituents by delaying a decision that had to be taken. Had that decision been taken at the time that it was planned, the new jobs, which are now coming in to replace the jobs that we lost in the area, would have arrived much sooner and before the recession. Any hon. Member faced with a threatened closure in his constituency is bound to fight tooth and nail — whatever the general arguments may be in favour of that closure — against it. It is no criticism of the hon. Gentleman that he did so. My criticism is of Governments, in particular the Labour Government of 1974, for fudging the issue and postponing the decision. They are the guilty men. [AN HON. MEMBER: "Lord Beswick."] As my hon. Friend says, it was Lord Beswick who was the instrument of the guilt. I clear the hon. Member for Alyn and Deeside from any guilt. It was a copybook example of how political pressures inexorably work against sensible commercial decisions in matters such as this.
There is a lot of talk about overmanning. In the course of looking into the steel industry, I went to Scotland and was taken to see the superb facility at Hunterston for handling ore imports. Alongside it is the magnificent direct production plant, which has never been operated from the day it was installed. I was struck by the ore terminal, which is one of the best equipped places I have ever seen. About a dozen men were standing on the quayside, and, looking at the clock, I said to the harbour master, "When are you expecting the next ship to come in?" He looked across the desk to his calendar and said, "I think it is on Thursday week." I said, "In that case, why are 15 men standing by the quayside?" He said, "That was the agreement we reached with the Transport and General. The ISTC were perfectly reasonable about this and said that they would send their chaps along when there was something to be done, but the only term on which we were able to open the facility was to have 15 dockers standing there, whether or not there is a ship."

Dr. Reid: Using the same logic, is the hon. Member saying that he will forgo his pay for those periods when he is at Westminster but is not speaking in the Chamber?

Sir Anthony Meyer: When I am not speaking in the Chamber, I am usually dealing with other parliamentry business. Those chaps were playing cards. It is a bit reminiscent of preserving the dinosaur hall at the Natural History museum.
Steel is no longer the dominant industry in Wales. Other industries, largely based on firms outside the country, have come in to take its place and Wales is moving steadily into the 21st century, but for as many years ahead as we can see steel will have an important part to play.
Shotton is renaissance; it has a new facility equal to any in Europe. South Wales has steel mills which are more competitive than any in the world. It is vital to ensure the future of the slimmed down Welsh steel industry. God forbid that we should think in terms of hiving off bits of it. It would be much better to keep the corporation whole,

not as a shrine for the preservation of our industrial past but as a brightly gleaming beacon lighting the way to a new future for Wales based on an industry of the 21st century.

Mr. Stan Crowther: I was not surprised to hear the hon. Member for Clwyd, North-West (Sir A. Meyer) say that he supports the Bill, because I remember that many years ago he urged denationalisation of the steel industry. I shudder to think what state the steel industry would be in today if his advice had been accepted.
We are debating a piece of pure dogma. It is the 11th commandment of the old Tory testament—thou shalt not make a profit and remain in the public sector. The Government consider that the only purpose of the public sector is to act as a hospital for lame ducks, to take over an industry which has been badly let down by its private owners because they have failed to invest adequately, then to put it right and restore its health so that it can be returned to the same private sector in which it suffered its earlier disasters. That is the Government's philosophy.
The industry has received substantial public funds. Much of that money has been spent on new capital investment, which was desperately needed when it was taken over in 1967. Another large chunk of money has been spent on closures and getting rid of over 100,000 jobs. The social pain of that is still being felt in steelmaking areas, including my own, where unemployment is 19 per cent., largely as a result of job losses in the industry.
The industry has gone through an appalling traumatic period, but at the end of it, thanks to the support it has received in the public sector, BSC has emerged as an efficient, competitive and to some extent profitable organisation. Let us not run away with the idea that the profits are enormous, because they are not, but at least it is profitable. Now it is to be restored to the private sector. Public pain for private profit is the keynote of the Government's philosophy.
Does anyone seriously believe that BSC would still be operating five integrated plants today if it had been in the private sector? Of course it would not. Would the stainless plant at Sheffield—which is now working flat out and bursting at the seams with orders, but which a little while ago was going through a difficult period — still have been with us today if it had been in the private sector? It would have been closed down. Even the works at Rotherham and Stocksbridge, which are part of United Engineering Steels — the biggest engineering steelmaker in western Europe—might have been closed during that difficult period a few years ago if they had still been in the private sector.
There has been a dramatic increase in the demand for steel, thanks mainly to the beneficial movement in exchange rates in the past year or two. Total output in January was 31·6 per cent. up on January of last year. In the Yorkshire and Humberside region—which includes the BSC plant at Scunthorpe and the BSC stainless plant at Sheffield, as well as the works at Rotherham and Stocksbridge—output is up by a staggering 49 per cent. My hon. Friends from Scotland will know that the increase in Scotland has been 35 per cent. But for the sustained campaign of my hon. Friends from Scotland, the trade unions, the Select Committee on Trade and Industry and the right hon. Member for Ayr (Mr. Younger), Ravenscraig would have been closed a long time ago.
Where would the capacity have come from to meet the great increase in demand which is taking place? It is absolutely unthinkable that the capacity would have existed if the industry had been in private ownership. There is no doubt that public ownership has saved the industry from virtual extinction, as it has saved other vital industries when private owners have badly let them down by failing to invest sufficiently to match foreign competition.
As BSC is showing a bit of profit — we are not talking about a lot — the Government are rushing headlong to privatise it. We have no assurances about future investment or the availability of capital for investment in the industry. Sir Rober Scholey, the chairman of BSC, whom I have known since he ran the Rotherham works, has said that £300 million a year is needed for new investment. On present profit figures, that is sailing very close to the wind.
My hon. Friend the Member for Dagenham (Mr. Gould) asked why there is such unseemly haste. I think I have the answer: the Government are determined to get the industry on to the market before the full impact of the electricity price increases hits it and reduces its competitiveness and profitability. They want to sell it to the private sector before the cut-throat price war starts in Europe following the phasing out of quotas. Given those two circumstances — the considerable reduction in competitiveness because of electricity prices going up, coupled with a fierce price war against companies which will still have backing from their Governments, whether legal or not—the Government want to wash their hands of the whole industry, and that is a disgraceful decision.
Meanwhile, as my hon. Friend the Member for Dagenham pointed out, there is no assurance that there will be any restrictions on foreign ownership in the privatised British Steel Corporation, or whatever the company is to be called. I have had correspondence with the Under-Secretary of State for Industry on this matter which is of great concern to people in BSC and in United Engineering Steels where 50 per cent. of the shares still belong to BSC. They want to know what is to happen to those shares. I wrote to the Minister and he replied that it is difficult because of EEC regulations. I wrote back and said that there were EEC regulations when Rolls-Royce was privatised, and how did he manage to get round that and provide a 15 per cent. limitation on foreign ownership in Rolls-Royce? My right hon. and hon. Friends will be amazed at the Minister's reply, which was that in the case of Rolls-Royce there was an additional factor: it is a strategically important defence contractor.
I have pointed out that without steel Rolls-Royce could not make a single engine. I can hardly think of an industry more important to our defence capability than steel.

Mr. Hardy: My hon. Friend's point about strategic interest is vital. He will be well aware of what happened when Britain invented Chobham armour. There are now only two firms in Britain that can produce it. The Government have invited Thyssens to tender for that which we invented.

Mr. Crowther: My hon. Friend is quite right. The engineering industry in south Yorkshire has expressed serious concern about that. It is an important defence issue.
Our steel industry has been saved at considerable financial cost and even greater social cost in the areas

where the jobs have disappeared. My constituents and I wish to know whether all the sacrifices have been made only to provide someone with some private profit. That is what is upsetting my constituents. It is disgraceful that, after all the pain it has suffered, this great industry is now to be put at risk for the sake of doctrinaire Toryism.

Mr. Richard Holt: I have noted down some of the topics on which I have received correspondence in the past week. I have received letters about a prisoner in Iraq, the life peerage of the Chief Rabbi, school buses in my constituency, the local post office which is under threat of closure, clause 28, the National Health Service, education and badgers. There has been not one letter about steel nationalisation. There is a steel works in my constituency, and not one person has written to me in the past week opposing the Government's proposals.
Three weeks ago I received a letter from the Iron and Steel Trades Confederation telling me that it was not going to oppose the Government's proposals because:
The union could spend large sums of money and considerable resources, as other trade unions have, campaigning against privatisation, but such a campaign would be a futile gesture. Steel is no longer one of the commanding heights of the economy nor is it a public utility. Instead, the ISTC is facing up to reality and must apply all its resources to safeguard the interests of its membership"—the interests of its membership in the industry being denationalised.

Mr. Coleman: Will the hon. Gentleman give way?

Mr. Holt: I shall not give way.
We have heard a great deal of statistics. One can wage a war with statistics to make one's case either way but this is not a debate about statistics. It is a debate about philosophy, attitude, and perhaps about dogma.
It was quite interesting that when I asked the hon. Member for Dagenham (Mr. Gould) what was the Labour party's policy, he said that the Labour party would renationalise the steel industry, which is about to be denationalised. Nothing could be more damaging.

Mr. Austin Mitchell: The hon. Gentleman was not listening. Why does he not listen?

Mr. Holt: I was listening. That is exactly what the hon. Member for Dagenham said. He was unsure about the form, but he said that the industry would be taken back into public ownership. At least some of the more honest Opposition Members are nodding in agreement. That is what the Opposition Front Bench spokesman said, and that is what Hansard will reveal tomorrow.

Dr. Reid: rose—

Mr. Holt: Perhaps the hon. Member for Dagenham will repeat what he said.

Dr. Reid: I shall repeat what he said. It is unfortunate that the hon. Member for Langbaurgh (Mr. Holt) cannot repeat, parrot-fashion, what was said earlier. My hon. Friend the Member for Dagenham said that in his view such a strategic industry for Britain should be under some form of social ownership. Had the hon. Member for Langbaurgh not been so busy shouting abuse he might have heard my hon. Friend's reply.

Mr. Holt: I heard specifically what the answer was and it will be in Hansard.
The debate embraces a philosophical attitude. Langbaurgh on Tees has a steelworks which for many years was a hallmark of inefficiency. Today, it has less than half the work force it had five years ago and is producing 120 per cent. of the steel it was producing then. That is a measure of the improvement of production at Redcar and other steelworks, which include the Skinningrove steelworks in my constituency in the years since 1979.
I do not wish to deal in statistics. We are about to decide the future of the steel industry for decades to come. The right hon. Member for Blaenau Gwent (Mr. Foot) waxed eloquent but he did not say a great deal. However, he did say that there had been a missed opportunity during the 1970s and that there was not the investment that there should have been. I agree with that. One of the reasons for the lack of investment historically was the ping-pong effect of nationalisation and renationalisation that has constantly occurred. If the private sector is asked to put money into a private industry which is liable to be renationalised when there is a change of Government, it will not invest.
The country has changed in its outlook. Twenty or 25 years ago very few people owned shares and young people did not know what shares were. I have a son of 26 and a daughter of 22 who are shareholders in a number of industries. That is not amazing but it reflects the change of philosophy between my youth and theirs and the outlook in the country today. The present opportunity to put the steel industry back into the private sector will enable young people such as my son and daughter and many others to invest in that industry. They will do so and the investment for the future will be there. The only thing that can stop that is the possibility that there will be renationalisation, when the dead hand of the Minister knowing best will return to the steel industry, as it has in the past.
Opposition Members have suggested that we denationalise industries only when they are making a profit. If Opposition Members can find someone to buy British Rail I shall guarantee that the Government will sell it, but there is no one foolish enough to buy an industry in such debt as British Steel was five or six years ago. All the money that was poured down the drain achieved nothing but it caused a greater change when the change had to come about. It may have been easy to phase in the changes to modernise the industry, but because there was a failure to address the problem between 1974 and 1979 it was important that it was done soon afterwards. Today the industry is much more realistic in its outlook.
I heard recently that a strike had been threatened by workers in Redcar during the past few days. British Steel said to them, "Strike if you will. If you do, we will close the plant and it will stay closed." What happened? British Steel prevailed and the men knew that the management meant what it said. They did not strike. They worked, and as a consequence they have kept the plant open and their future is secure.

Ms. Marjorie Mowlam: rose—

Mr. Holt: If the hon. Lady wants to make a speech, she should have come in and sat through the debate from the beginning, as I have done. Then she would probably be called and could represent her constituents in the same

way as I am representing my constituents. I shall not give way to the hon. Lady. She has only been in the Chamber five minutes and that is not long enough for me to give way to her.
Everyone should know the history of the Langbaurgh and Teesside area. The steel mills were built there because of the juxtaposition of coal and iron ore. There is no iron ore left in the ground and there is not so much coal-mining. So we are concerned for the steel industry. The security of being in private hands will keep the steel industry on Teesside. If it were still to be in public ownership in the future, a "Yes, Minister" attitude might prevail over the Minister of the day who might be told to close this and that. I am delighted that, throughout the entire debate, although we have heard a hell of a lot about closing Ravenscraig, we have heard nothing about closing Redcar. That is because of the success of the complex on Teesside.
My hon. Friend the Member for Pudsey (Sir G. Shaw) hit the nail squarely on the head when he dealt with the contribution of the hon. Member for Dagenham. I would have liked to use his words because they were so apposite in the context of the hon. Gentleman's speech. It was a poor speech, but I suppose one can understand that. When one has not got one's heart in a subject but has the commitment, as the Front Bench spokesman, to say a few words, it must be difficult. Apart from the Labour party, the only people who now want to vote against the Bill are the Liberal party, despite the fact that it said in its manifesto that it would vote with us. The unions and the people want steel to be denationalised.
Five or six years ago, immediately after the rundown of the steel industry, there was a very depressed air in Teesside. People were walking round with long faces. Unemployment was terrible. Today there is a new outlook and a new attitude. There is no longer so much unemployment. The number of unemployed is dropping. In every ward in my constituency there was a reduction in unemployment in the 12 months from January last year to January this year.
We now have the Teesside Development Corporation, which is working closely with the British Steel Corporation. A new attitude has come about because management, the workers and—yes—the unions in that area, want the industry privatised. They know that that will give them the opportunities and the security they seek. So the Government are not premature in bringing forward the legislation. It is spot on. This is the first time that they could have brought the steel industry to the market place after the years of decline and waste of money.
Let us think of what we might have done with the billions which have been wasted on steel. How many hospitals might we have built? How many other improvements could we have made to the social life of the country? What did we do? We poured all that money into a small, narrow area to sustain what was at that time a badly managed industry. I refute entirely what the right hon. Member for Blaenau Gwent said. It was only when Ian MacGregor came into the industry that he was able to put some backbone into the management which made it fight the trade union and tell it, "You do your job and we will manage the business." That is what is happening today. The management of British Steel wants privatisation because it wants the challenge. Anyone who disputes that should speak to any senior member of the board. All board members will say the same thing. They are looking


forward to the challenge and the opportunity. The Government's proposals will create a steel industry for the future.
In years to come I hope that we shall be debating not whether to close down Ravenscraig but how to expand it, or how, under the private sector, it has been expanded. All the time one has to be realistic enough not to believe that we can produce steel for which there is not a market place. The right hon. Member for Blaenau Gwent said that there was no need to have a market place, because we do not have to sell steel and we are not in competition with other people. Of course we are, and within the EEC there will be even more ruthless competition. As a privatised industry, steel will be able to meet the competition because decisions will be made quickly and commercially and will not have to go through the procedure of ministerial approval and committees before we get anywhere, with the prospect of losing the market, the shares, the opportunities and the jobs.
That is the epitome of a nationalised industry. Invariably nationalised industries have been badly run. Today they are improving. One of the main reasons for the improvement has been the introduction of many trade union reforms, with the result that industrial relations are much better. In the steel industry in the sixties and seventies many days were lost through strikes. The position is not comparable today. After privatisation there will be even fewer strikes.
I am pleased to have had the opportunity to contribute to the debate. I am pleased to speak on behalf of my constituents because they believe, as I do, that the Government's decision is correct. The timing is right and we look forward to the expansion of the steel industry. That is what my constituents want. That is why I shall rejoice when I vote in support of the Government.

Mr. Donald Coleman: I wish to make two declarations of interest. The first is that my hon. Friend the Member for Motherwell, South (Dr. Bray) and I are the only hon. Members who have attended the whole of this debate who served on the Standing Committee which saved the industry in 1967 by bringing it into public ownership. I am sorry that I have had to listen to the twaddle and claptrap that we have just had from the hon. Member for Langbaurgh (Mr. Holt).
My second declaration of interest, which the hon. Gentleman cannot make, is that I represent the steelworkers. I am sponsored by the Iron and Steel Trades Confederation. I was authorised by the executive council, meeting in London last week, to say categorically and clearly in the House that the union is utterly opposed to the privatisation of the British Steel Corporation. That declaration was made last week by the executive council of my union.

Mr. Ian Taylor: Is the hon. Member for Neath (Mr. Coleman) prepared to tell us whether that is his view, or the view of the union that instructs him to say it?

Mr. Coleman: I assure the hon. Member for Esher (Mr. Taylor) that I am an hon. Member of the House, and when I say something of that nature it is the truth. I challenge the hon. Gentleman to challenge me outside. If he says the same thing outside, I will take him— [Interruption.] I am not used to getting into fisticuffs of that sort, nor am

I used to telling untruths. I assure the hon. Gentleman that what I said was declared last week in Swindon house, the headquarters of the union. Does that satisfy him?

Mr. Taylor: I merely wished the hon. Gentleman to make his position clear, and he has done so.

Mr. Coleman: We in the Iron and Steel Trades Confederation oppose the Bill because we do not believe that it would be in the national interest. The steel industry should not be taken into the private sector, as the Government seek. Nor is it in the national interest to disregard the fact that in the past 10 years about £5 billion of taxpayers' money has been expended on the British Steel Corporation, to make it the most successful steel industry in Europe, if not in the world.
That would not have happened had the arrangements for bulk steel production in Britain existing before 1967 still been in operation. My union says, too, that now the industry is showing itself capable of making profits, those profits should be returned to the taxpayer, not through tax cuts to promote the popularity of the Government, but in expenditure on the Health Service, pensions or some other desirable social requirements. That is how we say that the profits of the British steel industry and the investment by taxpayers in the industry should be spent.
Further, now that the steel industry is profitable, that profit should not fall into the hands of speculators, especially from overseas. I do not suppose, however, that that declaration by my union, the principal union in the steel industry, will influence Conservative Members not to swarm into the Aye Lobby to support the Bill. But nor will their action prevent me from demanding in this debate the safeguards that I want, and my union wants for the country and the people who work in the industry. We demand that, should the Bill become law, there will be no break-up of the British Steel Corporation. It must remain a single entity. It seems that the Government, the Secretary of State and I are on the same side. We in the Iron and Steel Trades Confederation say that the industry is best served by remaining one entity, because anything else will be a disaster.
We also say that whatever company the Bill spawns must be a wholly British-owned company, with a substantial Government investment. In other words, the Government must retain a golden share in the company. We have a right to demand that, because the taxpayers' £5 billion investment in BSC has made this publicly owned industry an attractive proposition, and the sacrifice in job losses in the industry that has gone on over the years must be taken account of, and that contribution recognised. Let the Minister tell the House that there will be a golden share in the company, and that he will undertake that the company will be wholly British-owned. We cannot accept any other objective. We demand that the Government make it absolutely clear.
We also point to the industry's importance to the defence interests of Britain. We demand from the Government that they make it clear tonight that those interests are safeguarded. It is vital that the House is assured on this point. It will be too late to make these demands if such needs arise. We must be sure that the nation's defence is not put at risk through the failure of the new owners of the steel industry to invest properly to keep the industry efficient, as it is now, or through cuts in


capacity, especially if they are ordered by the European Coal and Steel Community, that could affect the British industry adversely.
Let us remind ourselves that never before has a bulk steel producer in private hands had to deal with the ECSC, which decides the amount of steelmaking capacity in Europe. It has the power to compel cuts. Conservative Members should remember that the circumstances of the British Steel Corporation are significantly different from the privatisations of British Telecom, British Gas, the water authorities or the National Bus Company. Hon. Gentlemen must remember that the European Commission has a say in steel matters and we are not masters in our own house. For that reason, British Steel might not prove to be such an attractive proposition.
While we are talking about the Commission, let the Minister tell the House tonight what will be the impact of lifting ECSC quotas in June 1988. It is important that we should know in this debate about the likely impact. I suggest that any investors would also want to know about that, and would think carefully about it before making their investment. They might be safer to put their money on a racehorse that I know about, which belongs to a cooperative of west midlands ex-steel workers. It is called "Springvale Campaign", and that name will not be lost on my hon. Friend the Member for Wolverhampton, South-East (Mr. Turner).
Before I raise a matter that has a bearing on investors' interests in the privatisation of steel, and whether it would be such a good deal for them, can the Minister tell us the reason for the indecent haste that has overtaken the Government in selling off steel? From what the Trades Union Congress steel committee could glean as recently as 4 June last year, there was no intention to move as soon as this to privatise the industry. What is the indecent hurry? Perhaps the answer can be found in the Government's refusal to publish the full report completed a year ago by the Monopolies and Mergers Commission. Is there, perhaps, something politically unfavourable to the Government in the report? I expect that the Minister will say that the report contains commercially sensitive matters, and for that reason they are withholding publication. Surely, if that be the case, investors or potential investors have a right to know about it before they buy the shares.
I look to the Minister for two further guarantees. First, will he make sure that the future requirements of British manufacturing industries are guaranteed? We must take care that those interests are safeguarded, and the Minister must make the point clear. Nothing else will do for the British industry. It must have guarantees on this matter.
The other guarantee that we must have is that employees' pension rights and conditions will be protected. These have already been paid for through redundancies. Part of the arrangements whereby job losses in the industry were effected concerned employees' pensions and conditions. We must have a cast-iron guarantee on those matters.
I look to the Minister to give satisfaction on those points before the Bill becomes an Act. He has a duty to the workers in steel, who made a sacrifice. Perhaps Conservative Members did not realise it, but without the

co-operation of the union that sacrifice would not have been made and British Steel would not be as healthy as it is today.
The Bill is a betrayal of the country's investment in steel and of the workers' sacrifices. It does not deserve a Second Reading and it ought not to get one.

Mr. Michael Irvine: I have a strong stomach, but it was tested to the full when I heard the hon. Member for Dagenham (Mr. Gould) say that British Steel's success of the past few years was a great advertisement for public ownership. He claimed it was under public ownership that the success had been achieved.
What the hon. Member overlooked was that this success was only possible under public ownership because this Government had the courage to follow a commercial approach, to take commercial decisions and to apply commercial principles. The Government applied the principles of private industry to a publicly owned industry. Over the past nine years hon. Members opposite have opposed just about every sensible decision that the Government have taken in relation to the steel industry. They have shown hostility to every hard but necessary decision. They have sought to make short-term political capital out of every difficult long-term decision that has had to be made.
My right hon. and learned Friend the Chancellor of the Duchy said that in 1978–79 the BSC's annual loss was £1·8 billion. That was in a single financial year. That is equivalent to £35 million a week. That is why my hon. Friend the Member for Langbaurgh (Mr. Holt) was right to draw attention to the scale of the losses which were being incurred, the draining away of public wealth.
It puts current disputes over the National Health Service into perspective. In my own constituency of Ipswich we are shortly to open a new, ultra-modern 86-bed hospital extension, which cost £4 million. So the weekly £35 million drain that the steel industry was imposing on the British economy in 1978–79 was the equivalent of something like nine hospital extensions of that kind a week.

Mr. Elliot Morley: I am grateful to the hon. Gentleman for giving way. In terms of the points that he has been making about steel losses in the past, does he think that it is justifiable that those billions and billions of pounds of public money which were invested in steel to get it into the situation it is in today should simply be written off, because the price the Government will get for BSC will in no way compensate for that public investment? BSC should be kept in public ownership so that the profitability that came from that public investment can go towards repaying it.

Mr. Irvine: The hon. Member for Glanford and Scunthorpe should remember that that trough in 1978–79 was the culmination of 12 years of steel in public ownership, and that what has happened since has been the application of commercial principles to a nationalised industry. Left to the policies, dogmas and doctrines of his party, the steel industry today would still be uncompetitive, overmanned, under-capitalised and fundamentally weak.
The great opportunity that privatisation will give to British Steel will be to enable those commercial disciplines to be maintained. At the same time, it will bring British


Steel freedom from Treasury control. It will give it greater flexibility. It will make it much more likely that British Steel will he able to take part in effective joint ventures with overseas corporations.

Mr. Dennis Turner: rose—

Mr. Irvine: I should like to give way, but many hon. Members, particularly on the Opposition side, also want to speak.
The one baleful shadow that I see is that of the European Economic Community quotas. I acknowledge that there was a time when those quotas were necessary as a short-term measure to deal with the problems of oversupply while the steel industries of the various European nations were putting their respective houses in order. But the short-term value of those quotas has ended. At present those quotas are simply protecting the inefficient and at the same time penalising the efficient. Now, fortunately, British Steel is numbered among the most efficient companies in Europe instead of, as formerly, among the most inefficient. Those quotas are holding back British Steel from making full use of its capacity.
I urge my right hon. and learned Friend to make every effort to ensure that those quotas are phased out, and quickly. The shadow of those quotas needs to be removed from the scene. For all that, I am confident that this Bill, by making it possible for privatisation of the British steel industry to take place, will usher in a new era of prosperity and dynamism for the industry.

Dr. Jeremy Bray: In 20 years of public ownership, after much effort and expenditure, the steel industry has been transformed from the chaotic and rundown state under private ownership that my hon. Friend the Member for Neath (Mr. Coleman) and I knew 20 years ago into what is today the most efficient and profitable steel industry in Europe, under a public ownership that could continue indefinitely.
Why, then, oh why throw it all again into the melting pot? The Opposition are totally opposed to the privatisation of the steel industry, which will contribute not a thing to the efficiency of the industry. It is a quite unnecessary threat to steel communities which have suffered huge job losses and which were looking forward to a period of stability in which they could build up employment again in more diversified local economies.
Nowhere are we more opposed to privatisation than in Motherwell, where Ravenscraig and its associated plants, which are fully competitive by world standards, have for years been picked out by BSC as next in line for closure. The privatisation announcement on 3 December set BSC free to take the decisive, irretrievable step next year with the closure of the hot mill, leading progressively to the loss of 11,000 jobs on top of our present level of 18 per cent. unemployment in Lanarkshire, much of it from past steel closures.
The threat is so grave that, out of common human concern and responsibility to our constitutents, my hon. Friend the Member for Motherwell, North (Dr. Reid) and I have had to concentrate on finding means of averting it. We have had to seek means within the letter and the spirit

of the Government's competitive, free-market, private-enterprise policies, which they have the majority to carry through Parliament. We cannot afford the luxury of political posturing. It is a matter of survival.
Motherwell district council asked Arthur Young, the management consultants, to examine the impact of the privatisation of BSC on the future of Ravenscraig and Dalzell works in my constituency. I have deposited a copy of the report in the Library and I have copies for any hon. Member who does not have one already and who would like one.
The report concludes that, if BSC is privatised as a single entity, even allowing for a 30 per cent. increase in United Kingdom manufacturing output over the next five years, it would not be in the interests of BSC as a commercial enterprise to keep Ravenscraig open beyond 1991 or Dalzell beyond 1994. The director of the CBI in Scotland, Mr. John Davidson, described the Arthur Young report as "highly professional and interesting".
If Ministers are bothered about the date of the next election, I agree that uncertainties about the market and BSC's response could certainly shift the dates of the closures by a year or two, but the final closure of Ravenscraig is inevitable once the hot mill is closed and the plant allowed to run down. The increase in profits of BSC as a single entity from the closure of Ravenscraig would be about £100 million a year, and shareholders would want to know why Ravenscraig was not closed.
However, the Arthur Young report offered an alternative. It rests on the nature of the competition that the BSC faces. The present proposal to privatise BSC as a single entity assumes that the competition comes from Europe. That is the view as seen and presented by the chairman, looking out. It is part of the truth. Certainly European competition has set, and will set, the general price level, but the competition that has so effectively reduced costs within BSC, particularly in strip products, has been the fight for survival between works, as every hon. Member who represents a steel constituency knows. Ask any steel worker or steel manager.
That is the reality. That competition would be brought to an end if privatisation took a form that simply allowed BSC to close Ravenscraig. The pressure would he off at works level. No amount of comparison with a distant and different Nippon Steel, Thyssen or Krupp would have the same effect. Look at the struggle in Ford, even within the same company, to make comparisons stick between Dagenham and Saarlouis. 'Would Wales have won with such brilliance at Cardiff on Saturday if Scotland had not been 17–10 in the lead at half-time?
The Arthur Young study found that, by maintaining the competition, with Ravenscraig, Shotton and. Dalzell forming a separate group, the competition would need to bring about only a 5 per cent. higher level of sales, and 6 per cent. lower variable costs than would otherwise have been achieved by a single entity, for the combined profits to equal what a single entity BSC could achieve by the soft option of closing Ravenscraig. Is competition worth no more than 5 per cent. on sales and 6 per cent. on operating costs? Production, employment, incomes, technical progress, and the contribution to the balance of payments from increased exports and reduced imports would be higher with the competitive solution. No direct jobs would be lost in north or south Wales, and the number of indirect jobs would, of course, increase. The only people worse off would be Sir Robert Scholey and the board of the British


Steel Corporation. With a smaller corporation, £85 million a year of profits would go into the new company. Is it any wonder that Sir Robert Scholey does not like the idea, and did everything that he could to block even the study?
Let me deal with some objections. The force of objections is somewhat diminished when we have heard them coming first from Sir Robert Scholey — with his knowledge, but also his interest in the matter. They should nevertheless be fully considered. We have no interest in deception or in patronising obscurantism. First, people who argue that size gives strength have not followed all that has been happening in recent years. I quote from this week's Fortune business magazine, in an article on "Corporate Strategy for the 1990s":
Most of the classical justifications for large size have proved to be of minimal value, or counter-productive, or fallacious. McKinsey's Bergsma goes through the list: Access to capital? That era is past. Better information? New third party providers are making information available to all. Economies of scale? Flexible manufacturing systems are driving out advantages of size. Markets for many corporate functions have developed — transportation companies, purchasing specialists"—
and so on. The BSC has cut its research and development by 40 per cent. in real terms since 1979. For all its size—perhaps because of it—BSC makes practically no use of outside contract research. It recruited only two first-class honours graduates into its research departments last year. BSC is almost alone among large industrial companies in having no employee serving on any research council or research council committee. BSC could do with some pretty stiff technological competition in Britain. That is as important for the industry in south Wales and the Port Talbot laboratories and on Teesside and at Scunthorpe as it is in Shotton and in Scotland.
Secondly, it is argued that the two companies would not compete because—apart from Shotton—BSC is not in coated sheet. In fact, with its strip mills, BSC is most of the way there, and Shotton would not and should not accept hot rolled coil from Ravenscraig that is not fully competitive — any more than it does today. By the competitive solution, we would at least maintain the present level of competition, while BSC seeks the soft option of reducing it by closing Ravenscraig.
Thirdly, the Minister said that his consultants had access to commercially confidential information to which Arthur Young did not have access, and that they reached different conclusions. The Minister can do better than that. He personally denied that access and has refused to give information on the advice that he has received. As for the fig leaf of commercial confidentiality, Sir Robert Scholey would describe the position of a rugby ball in midfield as commercially confidential if he thought that would help his case. Remember that he has £100 million a year at stake. Sir Ian MacGregor will tell the Minister, as he told me, that cost estimates can be synthesised from the standard industry sources, and Arthur Young used them.
There is always room for argument about timings, capacities and forecasts. However, there seems to be no doubt about the principal points; first, the proposed closure of the hot mill, which all informed people agree means that the end would be only a matter of time. Secondly, there is no doubt that the proposed Ravenscraig-Shotton-Dalzell group would be viable. That

leaves as the only major question the extent to which continuing competition in the United Kingdom would continue to improve performance, and that must be a matter of judgment. With BSC having scarcely begun to tap modern advances in material sciences, there is still plenty of room for improvement.
Finally, Shotton workers would not like it. As my hon. Friend the Member for Alyn and Deeside (Mr. Jones) knows, I have been there and have discussed the proposal with their trade union representatives. Like my hon. Friend, they have made their opposition transparently clear. I like the idea of industrial democracy. Perhaps we could have a vote on privatisation. The new group would give Shotton a much higher profile, with the head office and sales department of a sizeable company, with a full research and development laboratory, able to provide an outlet for the considerable untapped technological potential in new materials in north Wales and Merseyside.
It will take time to win acceptance, as change always does. I was told that Shotton would prefer a management buy-out. Well, why not? Why limit it to Shotton? With the shortages in hot rolled coil that were already developing last year, about which Ministers do not seem to have heard, it would not be sensible for Shotton to be without secure supplies. It is far too static a view to think that Shotton could rely on simply shopping around for spot supplies of hot rolled coil that could quickly cease to be available. Ravenscraig is the present and most appropriate source, and with it comes the strength of Dalzell's position in plates.

Mr. Barry Jones: On Saturday, Scotland's first quarter of play was some of the most robust and brilliant that I have ever seen. I know from my hon. Friend's remarks about his visit to my constituency to talk to my steel workers that he is an honourable and truthful man. Since I do not know whether I will catch your eye, Madam Deputy Speaker, I can only say that my steel workers remain unconvinced and have urged me to emphasise their Welshness and their wish to keep their link with Llanwern and Port Talbot.

Dr. Bray: I entirely understand my hon. Friend's attitude and position. As an Englishman with the privilege to represent a Scottish constituency, and having been to school in Wales, I do not regard the Welsh or the Scots as a racist people. We all need time to work out just what our interests are on these matters.
Rugby is not the only thing that Scotland takes to Wales. Scottish financial institutions, not to mention Scots, are already playing a considerable part in industrial development in Wales, just as Welshmen are in Scotland. We even have them in Ravenscraig. Why be dominated by a London-based BSC, when one can run oneself better in Shotton? I would lay a fair bet with my hon. Friend that it would not be long before people were saying that, if privatisation had to happen, the new materials group was the best thing that could happen to Shotton.
I have been upbeat and buoyant because the alternative does not bear thinking about. The Arthur Young study has told us that Ravenscraig and Dalzell will not long survive the birth pangs of a BSC privatised as a single entity. But an operation can save them, and the parts of BSC can live. At the very least, that is a proposition that should be properly examined, not just by the Minister and his advisers, but by all the people who can make it come true. It will need time to be examined.
We are not talking about a conflict of interest between Welsh and Scottish steel workers, nor even about giving the steel industry in Scotland a chance of survival. For the Government, we are talking about whether the competitive free markets in which they believe are good for economic growth, or only for the shortest-term profits of restrictive private monopolies. Is not properly structured competition good for jobs and economic growth as well as for profits?
For the Opposition, we are talking about whether we can organise a market economy to achieve economic growth. The Arthur Young report has made it impossible for us to hide our heads in the sand, or make strutting cuckolds of ourselves by demanding assurances and making promises of support for Ravenscraig which we know to be empty.
In Motherwell, we have moved very far and very fast to glimpse a chance of survival. The proposal for the new group has the support of all political parties in Scotland, as reflected in the speech of the hon. Member for Eastwood (Mr. Stewart), certainly in and outwith Motherwell, according to soundings that we have been able to take. It has the support of the trade union representatives of the 3,200 steel workers at Ravenscraig.
Lest my hon. Friend the Member for Alyn and Deeside should feel left out, let me say that the trade union representatives of the 700 workers at Dalzell, demonstrating—I believe, of course, only for Scottish steel trade unionists — some of the vacillation and parochialism which is not the strongest aspect of trade unionism in the steel industry, and clinging to hopes of survival on their own which are denied even by their own management, have long worked on the principle of being against anything that Ravenscraig is for.
We all need time to work things out. With no mention of steel privatisation in either their election manifesto or the Queen's Speech, and no consultation before announcing the proposed single entity, the Government must now allow time for thoughts to be gathered. It was only last Thursday that the Arthur Young report was published. Nothing that the Minister or the Government can say will now stop the Ravenscraig-Dalzell-Shotton option being examined.
If Ravenscraig is to be killed, it will die with dignity. But the House will understand the politically explosive effects in Scotland if our largest fully competitive industrial unit were closed with the Government having denied the test of the market, in which they believe, of a course which would have allowed both Ravenscraig and it competitors to continue.

Mr. Hal Miller: It is a pleasure to follow the hon. Member for Motherwell, South (Dr. Bray) and to return to him the compliment that he kindly paid to me. He spoke with knowledge, commitment and compassion on his subject and did not baulk at the difficult issues involved. It is tempting to follow him a little further about where the political opportunism lay. Perhaps it was on the Opposition Front Bench. It is even more tempting to explore the difference between social ownership and public ownership and how that is to be made clear to the electorate in due course. However, I came late to the debate, for which I apologise, and many hon. Members are waiting to speak. Certainly those points will have to be explored on a future occasion.
This is an emotional evening for me because I resigned from my minor post with the Government in 1981 on the issue of British Steel unfairly competing, with taxpayers' subsidies, against private steel companies. The debate has shown Opposition Members to have selective memories when they claim that only public ownership could save jobs. They have not alluded to the number of people working in private steel milk, particularly in the west midlands, who were put out of work by that self-same public company and its subsidies.
I do not wish to go over those battles, but I am afraid that the journalist triumphed over the historian in the entertaining remarks of the right hon. Member for Blaenau Gwent (Mr. Foot). It was his Government who shirked, or deliberately avoided—at any rate, he cannot deny that they postponed it — the issue of the Beswick report and the steel mill closures that it recommended. That was deliberately put off until the inevitable election. To claim that those plants were viable and, indeed, should have been expanded is an entertaining scenario for the right hon. Gentleman's constituents, but it cannot hold water with hon. Members.
The right hon. Gentleman also referred to the motor industry. Savage reductions have been made in our capacity and output, but the defects in quality and consistency of output rather put the boot on the other foot, leading to the decline in demand on the steel mills—despite the efforts of some, particularly at Llanwern, to improve the quality of their products.
Where do we go from here? A number of difficult points are outstanding. The hon. Member for Neath (Mr. Coleman) in particular drew attention to such problems as the EEC quotas. It should at once be stated that those quotas have not always been favourable to manufacturing industry. I am one of those who have been trying to secure the admission from abroad of high-tensile steel which cannot be obtained elsewhere for the manufacture of motor car wheels. Steel quotas have not always helped our industry to modernise itself or to improve its products.
As far as I am aware, the United States has not yet been mentioned. Many perils face our exports of steel products to that country, and the Government will still have to be involved in questions of trade. That is, I think, part of the assurance that Opposition Members have been seeking. It is not a matter of the Government removing themselves altogether from the steel scene, because they still have onerous responsibilities. It would be as well if my hon. Friend made that point in his reply.
The idea that the industry has succeeded only because it is in public ownership really cannot be sustained, and takes no account of the continuing unfair basis of competition with companies in the private sector—and even the basis on which the Phoenix companies, such as United Engineering, should work. That firm is of particular concern to me as it has a large plant in my constituency. We still have such firms as Walter Somers, in open hearth die steel, competing with Sheffield Foregemasters on a very uncertain basis, with the latter's access to the taxpayers' pocket.
I welcome the Government's early step to resolve the problems. I have argued all along, even when the privatisation of steel was not possible, that steel in public ownership must operate on a basis of company accounts so that it can be seen where the subsidy has gone and the basis of competition can be understood.
I believe that this step had to come. It gives the workers so ably represented by the hon. Member for Neath the chance to take a stake in their own industry, and enables suppliers, consumers and the public to do the same. That is the sort of public ownership that we want, which is why I heartily support the measure.

Mr. Barry Jones: Having intervened in virtually every other speech, I hope that there will be no interventions in mine, and I can promise a brief speech.
Let me say to the hon. Member for Clwyd, North-West (Sir A. Meyer) that, even given the Government's current highly dubious unemployment figures, 10,000 are now unemployed in the travel-to-work area of Shotton. The male unemployment rate is 18 per cent. I calculate that several thousand of those are my constituents, who have not worked since they lost their jobs when the Shotton steelworks were closed in 1980. That was a tragedy. The workers did not wish to surrender; nor did I, and nor did a single one of our local authorities. I felt that it was our duty to fight, and to propose new steelmaking at the Shotton works. Notwithstanding progress in the creation of a new economy, the existing unemployment figures proved right those of us who had wanted to fight.
On Saturday, I met members of the Shotton steel committee representing the works. They had told me in a letter that they wished to make a public statement. They write:
We are convinced that any hiving off of the industry into smaller groups or units would not be in the best interests of the BSC as a whole or any works in particular. Having suffered the ravages of closure of the major part of the works with its subsequent loss of jobs on an unprecedented scale, we now feel that having weathered all the storms of the last eight years, we are now in an extremely strong and healthy position. The order book is full, investment is guaranteed and we have first class products which are in an expanding market. This can only bode well for the future. To maintain and continue this success story we need the security of the corporation as a whole, for future investment, continued research and development and marketing expertise. To this end we see no benefits by isolating ourselves from the mainstream of the industry. Job security, safe working conditions, fair wages, good pensions—these are what we seek and hope for our members. And we feel that these aspirations, plus the future prosperity of the Shotton works, with its benefits to the community, are best served by our continued association within the BSC and not by fragmentation of the industry however well meaning these proposals may be.
In an encounter on Saturday in my surgery in Connah's Quay, that letter was given to me by Joe Gibson of the Amalgamated Union of Engineering Workers, Ron Hill of the Iron and Steel Trades Confederation and Bob Butt of my own union, the Transport and General Workers Union. They told me that they did not want a management buy-out.
I want to emphasise briefly the achievements of the work force at home. Locally, we are seen as the "jewel in the crown" of the corporation's empire. We have slimmed down hugely; we have had immense demanning and have increased productivity at an astonishing rate—all under the leadership on the shop floor of local trade unionists who have sweated blood in difficult conditions. My constituents at Shotton can rival any Japanese or German work force for productivity. I cannot praise them too

highly. They have made every sacrifice. I know that about £100 million in a decade has been invested in the Shotton works. Management and labour have collaborated effectively to compensate for the loss of 8,000 jobs in 1980, between Christmas and Easter. Arguably, that is the biggest ever loss of industrial jobs in Western Europe. It all happened in just three months. That is why my colleagues from the Shotton works came to see me last Saturday and gave me their considered thoughts. I support them to the hilt and respect all that they seek to do and all that they say.
I see the Bill as a step in the dark. I want to know what will happen to the privatised company if world trading conditions take a turn for the worse. Would the Government bail out that company?
I also have a question on imports. Is the Bill designed to lessen importation, or not? I advise the hon. Member for Bromsgrove (Mr. Miller), that the Government told me that in 1986 our nation imported over £1 billion of foreign steel — mostly strip. I know the hon. Gentleman's interest in the motor industry and advise him, in addition, that in that same year, 1986, Britain imported 1 million motor cars at a cost in excess of £4·5 billion. Every car that is imported into Britain is foreign steel and foreign strip. Every right hon. and hon. Member knows that our balance of payments is in an unhealthy state. However, there has been £5·5 billion worth of imports which, as time goes by, I predict will prove to be an immense strain to the British economy. Does the Bill presage more imports or fewer?
I now address the subject of pensions. I seek a categorical assurance for my constituents at Shotton steelworks that the corporations' employees will not lose out. They tell me — I agree — that satisfactory arrangements are vital. Can we be sure that foreign companies will not be allowed to obtain a major shareholding in the new company? Like my hon. Friends, I see the steel industry as Britain's strategic industry. We need to guarantee that if the steel industry is privatised, a foreign company or a foreign power will never have leverage on our fundamental industry. I note that there are already cracks in the Government's approach relating to other privatised industries. Only earlier today in the statement, we had an example of that. I hope that if the Minister catches your eye, Madam Deputy Speaker, he will address that national point.
I ask again, "Will there be genuine consultation and negotiating procedures, nationally and locally, about the future shape of the industry, and about wages and conditions of service?" When I talk to my steel workers, I know that they want me to seek guarantees about health and safety. We want more not less work in that vital area.
On training, can we be sure that there will be more, not fewer, apprenticeships? Economically, the future of Britain in the next century is related to the way in which we tackle training. We need more not less training in steel in the years ahead.
On research and development, if the industry is to prosper in the next century we need to know what the privatised company is prepared to invest under that heading because it is of crucial importance.
I ask the Minister to express concern for the environment because throughout Britain our citizens are now demanding improvements. Would a privatised profit-conscious company cut corners with regard to the environment? I hope not.
I notice that the Financial Secretary to the Treasury is in his place on the Treasury Bench. I should like to say to his face a word of thanks for the manner in which he has delivered speedily over £500,000 to constituents of mine with regard to top slice tax relief that should have been paid in 1980. He efficiently delivered it late last year, which is much appreciated in my constituency.
Finally, we will listen with care and interest to what the Minister says about the writing-off of debts. Your wish, Madam Deputy Speaker, is for short speeches; I hope that mine has been reasonably short. I warn the Government that this is a step in the dark and even at this late stage they should think again.

Mr. David Nicholson: The hon. Member for Alyn and Deeside (Mr. Jones) spoke with passion, concern and great authority. Many Opposition Members have represented constituency interests strongly. I do not have a constituency interest, but for five years before I became a Member of this House I worked for the Association of British Chambers of Commerce which, in their individual capacities, have shown concern for individual steel plants and the effects of their closures, and in their national capacity have shown continuing concern for manufacturing industry and its competition. Indeed, through that work I learnt about the point that was made by my hon. Friend the Member for Bromsgrove (Mr. Miller) about the importance of the private steel companies being able to compete with British Steel.
I welcome the Bill because it is long overdue. Indeed, since calls for nationalisation are normally greeted with cheers by the Opposition, and calls for denationalisation — I hope that we can occasionally use that now outmoded word — are greeted with applause by Conservative Members and, I believe, by the country, I am somewhat surprised that this measure was not forecast either in our election manifesto or in the Queen's Speech, but perhaps we will have a response to that later.
In my election address on the subject of privatisation—call it what one will—I said that the interest of the consumer was paramount. I had in mind not only the two great privatisations of the previous Parliament—British Telecom and British Gas — on which continuing vigilance by this House and its Select Committee will be necessary, but also the two major privatisations that are predestined for the rest of this Parliament — electricity and water. I advise my right hon. Friends that I cannot guarantee that I shall take an entirely uncritical approach to those. However, I believe that steel is a relatively straightforward case.
I disagree strongly with those Opposition Members who have claimed that the value of public ownership has been proved by what has happened since 1979. Let us look at what has happened since 1979. Until my right hon. Friends took the industry by the scruff of the neck its history in public ownership had been one of political interference. It had been forced to keep open non-viable plants and, by 1979, West Germany, with a steel production work force only 50 per cent. higher than that of Britain, was producing more than twice as much steel. Indeed, profit figures have already been mentioned. In 1979–80 BSC lost £1,784 million but that loss has now been converted into a profit.
The measures that have been taken to bring BSC back into a competitive position have required unpleasant

actions in a number of areas. I pay tribute to the success of the enterprise zone and the creation of new businesses in Corby that have led since 1985 to a 51 per cent. fall in unemployment.
I would remind the House that fewer steel workers now expect to remain in the steel 'industry for the rest of their working lives. The other day I met a taxi driver in My constituency—I have no idea of his political allegiance — but he had been made redundant from the Scunthorpe steelworks six or so years ago. He had had a difficult time in regaining a viable living. However, thanks to the enterprise allowance scheme, he has now set himself up as a taxi firm in Taunton. That is a success story for the Government's employment measures.
This is a historic occasion because the ownership of the steel industry has moved backwards and forwards from public to private ownership since the war. I have had an interest in such matters for some time. I should like to make two points with reference to the historical perspective. I do not believe that everything that the private sector does is good and, many years ago, there were occasions when private steelwork owners were open to criticism. Correlli Barnett, in his book, "The Collapse of British Power", states:
The evidence given before the Iron and Steel Industries Committee in 1917 portrayed a generation of industrialists in whom ignorance vied with complacency. These were men far whom their own old curiosity shops of foundries represented the summit to which progress might aspire and for whom the sophisticated metallurgical science of foreign competitors was not a matter worthy of the attention of a British iron or steel-master.

Mr. Austin Mitchell: That is what we will go back to.

Mr. Nicholson: No, not at all. We need to be aware of history and be warned by past events.
Let us consider another lesson from the past that points to Government policy regarding the economic conditions in which industry operates. I quote from a book which I had the honour to edit, "The Leo Amery Diaries". On 19 November 1925 his diary read:
Committee of Civil Research which is now getting near the summing up stage on the Iron and Steel business. Philip"—
Sir Philip Cunliffe-Lister, then President of the Board of Trade—
summed up ably and temperately in favour of a safeguarding inquiry;"—
the aim was to give a tariff to the industry.
"Winston"—
then Chancellor of the Exchequer—
naturally to the effect that the evidence had obviously shown that we could not grant one"—
an early Cabinet split—
I as naturally in the opposite sense comparing all these efforts to wriggle out of the proper and obvious solution of all our difficulties to bluebottles buzzing in a fly trap.
Those quotes demonstrate the position of the industry and the economic circumstances surrounding it.
I hope that privatisation will help us regain at least part of the 40 per cent. of the market that we have lost to foreign imports. I emphasise that the success of the industry depends upon the Government's attitude, for example, to exchange rates. Those rates caused us considerable difficulties in 1980 and I hope that the Government will address that point.
The Iron and Steel Trades Confederation journal for February 1988 states:
The union could spend large sums of money and considerable resources — as other trade unions have —


campaigning against privatisation. But such a campaign would be a futile gesture. Steel is no longer one of the 'commanding heights' of the economy, nor is it a public utility. Instead the ISTC in facing up to the realities of the situation must apply all its resources to safeguarding the interests of its membership
I am sure that that is correct and that shows that certain trade unions—more and more, I hope—do not take the strongly ideological opposition to this measure that I fear has been adopted by Labour Members.

Mr. Alex Salmond: If the Bill is passed unamended, it will be a death warrant for the Scottish steel industry. It will send, virtually unencumbered, a corporation into the private sector whose senior management's antipathy to the Ravenscraig complex is well known and well documented. It is a relatively simple matter to map out the bleak future for Scottish steel if the Bill is passed. Indeed, the hon. Member for Motherwell, South (Dr. Bray) did so extremely professionally.
Over the next seven years successive parts of the Ravenscraig operation will be closed as alternative capacity becomes available elsewhere. First, the strip mill, then one of the blast furnaces and finally the rest of the operation — no doubt in good time to meet the ministerial promises of seven years' iron and steel production at Ravenscraig.
In Scotland we know when bad news is coming. It is preceded by statements from Tory Central Office entitled, "Good news for Scotland". Indeed, it was with that banner headline that the Tories greeted the closure of the Gartcosh finishing mill. I have absolutely no doubt that someone is beavering away at this very moment attempting to interpret the Britoil announcement as more good news for Scotland.
In December the Minister suggested that hon. Members representing Scotland should be pleased with the equivocal assurances of seven years steelmaking at Ravenscraig, yet it is another example of the Government's track record of deceit. If the Minister wishes to prove us wrong he should re-word the guarantee to include all steel operations at Ravenscraig, Dalzell and Clydesdale.
Bevan said "Why look at the crystal ball when you can read the book?". In Scotland we do not need a crystal ball to divine the intentions of the BSC. We need only to refer back to 1982 when it had to be prevented from closing Ravenscraig by political intervention. Those were the days when Scotland still had a Secretary of State who considered it part of his responsibilities to fight Scotland's corner in the Cabinet. The right hon. Member for Ayr (Mr. Younger) may have lost more battles than he won, but he is infinitely preferable to his successor who has not lost a political battle because he has fought no fight at all.
Let us consider the absurd spectacle of the Secretary of State, in what was billed as a major speech and, apparently, in all sobriety, proclaiming the virtues of privatisation for the Scottish economy—that in the week that has seen the sell-out of its largest company, Britoil, because of the Government's failure to keep promises made at the time of its privatisation. The Bill aims a dagger at the heart of the Scottish steel industry as a result of more privatisation.
The decision to sustain Ravenscraig in 1982 was clearly correct. The work force has broken production record

after production record. Ravenscraig has been operating at well above design capacity. It has been crucial to the build-up of profitability in BSC and that, of course, has made viable the privatisation we are discussing. Unless the Bill is stopped or substantially altered, those efforts will be rewarded by a long lingering death for Ravenscraig over the next seven years. Just as BSC was wrong in 1982, so it is wrong about Ravenscraig in 1988. As an integrated unit Scottish steel could face an outstanding future, responding to the revival of the oil market in the 1990s. As a peripheral plant in a privatised BSC there is little or no prospect for survival.
The implications for the loss of the steel industry go far beyond the direct and indirect impact on the economy and beyond the social consequences for individual communities. When uncertainty surrounds Scottish steel all business, which uses up primary material, is under threat. What country will develop or expand a steel dependent industry when there is a clear danger that a steel rundown will remove Glasgow as a basing point for pricing steel products? The effect will be further to catapult industry towards the midlands, which is the hidden agenda behind the Government's pursuit of steel privatisation.
There is a case for the privatisation of steel. It is not a case which I support, but it is one which is arguable. There is only the poorest case for the privatisation of steel as a single unit. If the BSC is sold as a single entity with dominant market control in the United Kingdom, its capacity will inevitably be reduced below the level which will pertain if it is kept in the public sector or sold as two or more competing units. Over time, the new privatised BSC will reduce output to maximise profitability and will meet excess demand through further imports.
Such is the option open to a company sent into the market with neither the constraints of public accountability nor major domestic competition. The measure smells of opportunism, the chance to make a quick buck in a tidy fashion without the complication of having to think things through. Privatisation in that form will be bad for all the steel industry. Ravenscraig could well be the first casualty, but, most certainly, it will not be the last.
Our colleagues in Plaid Cymru are extremely worried that a free market force will further emasculate the industry in Wales. Since the war, the number of steel workers in Wales has dropped from over 100,000 to under 20,000. As in Scotland, whole communities are dependent upon steel and their future is in the balance.
In its aftermath, the Bill will bring political changes. The threat to the Scottish steel industry may convince many Labour supporters, and perhaps even a few Labour politicians, that the state of the United Kingdom is not compatible with the health of the Scottish economy. The remaining Tory Members from Scotland face a dilemma this evening. Here is a measure which is both anti-Scottish and anti-competition. It is against not only the principles of the SNP, the Labour party and the alliance, but what should be the economic principles of the Conservative party.
I offer the remaining Tory Members this warning, or at least I would do if there were any in the Chamber tonight. If, as Opposition Members suspect, the Bill is the preliminary closure notice for Scottish steel, it will most certainly be the final closure notice for the Scottish Conservative party.

Mr. Elliot Morley: Steel, iron and ironstone have been an integral part of the economy of my constituency. We appreciate how important the Bill is for the constituency and the future of steel work there.
In our debate, we have discussed whether steel workers welcome the measure. My predecessor was a Conservative Member and, in the last general election campaign, the future of the British Steel Corporation and the question of privatisation featured prominently. Before the campaign started, my predecessor was all for privatisation and demanded that it be brought forward as soon as possible. Quite amazingly, during the campaign, he changed his tune and said that there would be no privatisation during the life of the next Conservative Government, and that privatisation was many years away. Ministers who visited my constituency during the campaign repeated the message that the BSC would not be privatised for many years.
We can already see what has happened, in the first Session of a new Parliament. If the Government can he so dishonest towards the electorate, particularly when the manifesto and the Queen's Speech made no mention of the proposal, how can people trust the Government? During the election campaign, it was evident that the people of Glanford and Scunthorpe trusted the Labour party more than the Conservative party to defend the interests of steel workers and the future of the steel industry. I do not intend to break faith in the confidence that those people put in me when they sent me here to represent their interests.
I want to talk about the interests of steel workers and of the industry. The Bill makes no mention of pensions, protection of jobs or protection against foreign takeovers. It makes no mention of giving the work force a share in the benefits of the industry. Perhaps the Minister will tell us whether he wants to see speculators in the City take all the short-term benefits or whether he intends to give a free issue of shares and a share in the industry to the people whose productivity has made a turnround possible.
In some ways, Scunthorpe has recovered from the shattering blow of the steel closures. Eighteen thousand people were employed in the steel industry there. The current figure is 7,500. That was a tremendous blow to the town. Is that tremendous sacrifice to be thrown away when the industry is now back in profit and Scunthorpe is breaking all productivity records and is capable of competing with any other steelworks? Are we to lose the sacrifice of all those families who lost breadwinners when they were put out of work?
In a reply, the Minister told me that, since June 1979, £5,151 million have gone into the BSC. All that is to be written off. Let us make no bones about that. That debt is to be wiped off to enable the industry to be sold. When the industry is in profit, as a result of public investment, it is wrong and irresponsible to write off that debt and not to keep the steel industry in public ownership to make its contribution to paying back that investment.
I fear very much for the future of the industry. In world and European terms, the BSC is not the largest steel producer. The advantage of public ownership is that it evens out the cycles which affect the industry. When the flotation is announced, will the Government warn small investors just what a high-risk investment it will be? The problem of over-production in Europe has still not been

resolved. The industry is vulnerable to currency fluctuations. It is a high-risk investment and does not compare with the natural monopolies of British Gas and British Telecom, which were privatised at some considerable loss.
It has been argued that the measure would free the industry from state interference. I wrote to the Minister and asked him how much the BSC advertising campaign was costing. He replied that that was a matter for the board and not for him. There does not seem to be much control when the Minister allows a public corporation to spend its money in a way which blatantly advertises privatisation through its slogan, "The shape of things to come". I do not oppose the BSC marketing itself. It has had a considerable achievement and should be proud of that.
Those people who work in the industry in Scunthorpe are proud of their achievements and their contribution to the industry. It is an act of irresponsibility to write off those debts when the industry is in profit. My constituents tell me that the Humber bridge board, which affects my constituency, has debts of £300 million. It costs £1·50 each way to cross the bridge. It is affecting the economy of the region, as it represents a cost barrier, yet the Government refuse to write off the £300 million debt when they think nothing of writing off a £5 billion debt.
Those are the Government's priorities. That is hypocrisy. The Government are prepared to plunge steel into the uncertainty of private ownership for short-term gain and pure ideological commitment. When steel is doing so well, why not keep it as it is and let the people who work in the industry have some security and let taxpayers enjoy the returns on their investments over so many years?

Ms. Marjorie Mowlam: I shall he brief because many of my hon. Friends want to participate in the debate. I want to put on record my response to the cheap political jibe from the hon. Member for Langbaurgh (Mr. Holt). I am learning to know and hate his jibes. I was not in the Chamber because was serving on a Committee, and it is difficult to be here all the time.
Let us be straight about what the Bill is about: short-term profit. It is about selling off the assets of British Steel cheaply. Steel communities such as Redcar know what it is to have seen the industry made lean in previous years. My hon. Friend the Member for Rotherham (Mr. Crowther) put the point succinctly earlier when he said that we are suffering public pain for private profit.
The hon. Members for Langbaurgh, for Stockton, South (Mr. Devlin) and for Darlington (Mr. Fallon), all of whom inhabit the Conservative Benches, have frequently told us that the workers on Teesside are sitting and longing for privatisation to arrive; they are desperate for privatisation and the chance to buy shares. If the matter is put to them in terms of quick money and profit, people will respond in the way that Conservative Members tell us they will, but it is important for Conservative Members who represent Teesside to realise what has happened.
I quote some of the differences between the current prices of shares and the issue price for privatisation. The issue price of British Petroleum was 363p, its current price is 248p; for British Gas, the figures were 135p and 130p respectively. For BAA, the issue price was 245p, and the


currrent price is 104p. So Conservative Members should be straighter when talking to workers on Teesside about what the price of shares will bring them in the long run—

Mr. Fallon: rose—

Ms. Mowlam: I shall not give way, because Conservative Members did not.
Let us examine the issues of privatisation that concern the workers on Teesside. I shall explain the worries they have expressed in my surgeries. They are concerned about guarantees of their pensions, terms and conditions—the Bill offers none. As my hon. Friends have said, the workers see public money being spent for private profit. Clause 14 clearly explains that public money will pick up the cost of advertising. The Minister will not tell us how much that will cost, now or during privatisation. In answer to a parliamentary question on 18 January we were told that the advertising cost for British Telecom was £11·7 million; for Britoil, £3·1 million; and for British Gas, £11·5 million. So we have some idea of how much public money will be wasted on the privatisation.
We have also heard quite a lot about the debts that will be written off to make British Steel a more profitable bet for the private sector. The Minister shakes his head, so we look forward to hearing from him why this privatisation will be different. Why will it be different from 1980, when £100 million was written off for the National Freight Corporation, and when £160 million of Government loans were written off for British Airways? Perhaps it will be different because the Government already wrote off £3,000 million for British Steel in 1981, and another £1,000 million in 1982. Perhaps the Government have managed to write off some debts through the back door already.
I am a new Member and I do not completely understand clause 5, so perhaps the Minister will clarify it for me. It states that the Government will be appointing—I presume, after the Bill becomes law—nominees for the purpose of the issue or allotment of securities. If the DTI's press notice of 1 February is correct, I presume that that has already been done. I know that my hon. Friends have already asked this question, but the answers were unsatisfactory. Has clause 5 been pre-empted before the Bill came before Parliament?
As my hon. Friend the Member for Neath (Mr. Coleman) said, the ISTC has fought hard, nationally and locally, to show what British Steel can do, along with workers and management in the industry. On Teesside, we want economic progress and not financial speculation. That will be achieved by leaving British Steel where it is now—in the public sector.

Dr. John Reid: First, I congratulate my hon. Friend the Member for Motherwell, South (Dr. Bray) who made an eloquent, passionate and committed speech on behalf of his constituents. It was based on his expertise in the steel industry and on a feeling that pervades the whole of Lanarkshire and Motherwell—of fear for the future of the jobs, families, community and steel workers, because of the threat to Ravenscraig. His eloquence stood in marked contrast to the Minister's speech.
The Minister started off with a philosophical ramble around the privatisation houses. He informed us in the course of discussing old battles that the battle is now over and won and the ideological tussle finished. I do not want to get into a philosophical dispute with him, but he is mistaken if he thinks that. He mistakes minutes for hours. Although he may have made advances in the past few years, if it comes to the choice between unfettered free enterprise, irrespective of the consequences for human beings, and a planned, sensible intervention in the economy, in the course of time the Minister's philosophy will be washed up on the shores of history like the anachronism it is.
There is some nostalgia in the debate, because there have been battles. In my case, the nostalgia is bitter, because almost a quarter of a century ago my predecessor, in his maiden speech, argued strongly for the necessity of returning British Steel to the public sector because of the desperate need for investment, job security and long-term security for the industry. Today we are debating the very opposite — the Government's dogmatic insistence that the publicly owned steel industry, no matter how healthy, profitable, productive and efficient, should be returned to the private sector and hived off for private profit to the Government's friends in the city.
Privatisation is a bad deal for the taxpayer, the work force, Scotland and Britain. In the first instance, the taxpayer will, as usual, get the worst deal. As was admitted earlier today and is recognised on all sides, the taxpayer subsidised the steel industry through its loss-making period and through rationalisation to the tune of £5 billion. The same ordinary taxpayer, for whom the Government shed crocodile tears in their publications and propaganda, has footed the bill for the massive investment that accomplished the turnround in British Steel's fortunes. That long-suffering taxpayer bore the burden of redundancy payments and the benefits paid to unemployed workers thereafter, and it is our friend the taxpayer who will continue to pick up the tab for any future cost of maintaining labour shed by the British Steel Corporation.
With such commitment, sacrifice and financial investment being made by the taxpayer, it might just be expected that he could expect some return now that the television commercials every evening bear testimony to the strength and profitability of the British Steel Corporation — but no such thing. The Government and their financial friends have entered upon a peculiar sort of contract with the British taxpayer. It can be summed up as, "Heads we win, tails you lose." The sell-off of British Steel also represents the sell-out of the British taxpayers.
Another group has also been sold out by the Government. They have invested all they have in the now profitable British Steel Corporation. In the main, they have little capital to invest; they do not have huge bank accounts and cannot sell Picassos to buy block shares in the new corporation. I refer to the work force of the corporation, who have invested their lives, energy and efforts in making BSC the prosperous concern that it is today. They have accepted cuts in numbers, moderation in wage increases, flexibility in work practices and increases in productivity. What will be their share of the BSC bonanza?
What is in it for the steel workers at Belshill, Motherwell, Llanwern, Port Talbot or elsewhere? Will there be guarantees that their future and plants will be


secure, or will there be, as there often has been in the past, the inheritance of ambiguity and threats of insecurity, which has always come when steel has returned to the private sector? Those workers and their families, particularly in my area, where the threat is greatest, deserve, at least, a guarantee that their future will be secure. The Minister refuses to give such a guarantee.
My constituents work in the shadow of the Ravenscraig steel plant at the less popular plant — less popular among the press—at Clydesdale tube works in Belshill. Over the past few years, they have been struggling against a decline in their main market, which was directly related to North sea oil activity. In addition, as the Minister will know, fluctuations in the exchange rate have worked against them. They have suffered from a desperate lack of investment in their mills.
Despite those losses of market and difficulties with the exchange rate, the workers and management—to give them their due—at Clydesdale can take some pride in the fact that the order book is filling up, the shift pattern is increasing and losses have been cut steadily. Only yesterday we learned that over the past three months the books have been balanced.
Under public ownership, contingency would be made for short-term fluctuations. There is no evidence in the history of private steel ownership that a position such as that at Clydesdale would be sustained, even though it is suffering in the short-term from factors outside its control.
To safeguard the United Kingdom's strategic position in supplying the North sea oil industry, the Government must give an assurance that substantial production will continue at Clydesdale in the long-term. Indeed, recently the Minister—to give him credit—and the chairman of BSC were able to confirm a more optimistic long-term future. Will that view still be taken when Clydesdale, along with the other plants, is pushed out of the public sector and into the quick-buck private sector? Will we be able to intervene in the long-term interests of the work force, the local community or the British people? Will we be able directly to influence the management about the need to maintain future investment? We will not be in a position to do so, and the Minister knows that only too well. Part of the reason for privatisation is to avoid those obligations if BSC were to remain in the public sector.
The Chancellor of the Duchy told us—no doubt we will hear it again — that he recently came to the Dispatch Box with what he was pleased to call a guarantee for the future of Ravenscraig and the Dalzell works at Motherwell. He made a statement to the House and waved his papers in the air and said:
subject to market conditions, there will continue to be a commercial requirement for steel making at Ravenscraig for at least the next seven years … there will be a similar requirement for plate rolling at Dalzell."—[Official Report, 3 December 1987; Vol. 123, c. 1107.]
That was an extremely convincing performance; the Minister is not without charm. I had to push continually from my mind the analogy of Neville Chamberlain waving a piece of paper and promising peace in our time. We were promised steel in our time, subject to market conditions.
I have learnt that a Conservative Minister — Mrs. Thatcher's lieutenant—calling upon market conditions is rather like Pontius Pilate calling for the hand towel and soap. Effectively, that was not a guarantee but a timetable for execution laid out by the Minister for those who had eyes to see.
The paper was as worthless as that waved by Chamberlain. Had he been more honest, the timetable for Ravenscraig could have been summed up as "legislation in 1988, flotation in 1989, amputation in 1990 and termination in 1991". That sums up the Minister's statement. The Bill is a further extension of that.
Market conditions—which were referred to as a get-out for the Minister—were dealt with to some extent by my hon. Friend the Member for Motherwell, South. We could not gain access — primarily because of the intervention of the Minister and the chairman of the BSC — to all the available market conditions criteria and information. My friends on Motherwell district council employed Arthur Young and Company to commission the study that was referred to earlier by my hon. Friend. Time prevents me from elaborating on that study, but the case has been made for an investigation of it in greater depth by the Minister and his Friends.
The Minister referred earlier to the fact that, along with merchant bankers, the Government investigated various forms of privatisation. There is a duty on the Minister—if not tonight, at least in Committee—to make the evidence, conclusions and details of that investigation available to the Committee so that we can ensure that every option has been explored.
The Minister described public sector interest in steel as interference. He blamed us for taking an interest and accused us of lobbying the management of BSC. If it had not been for that lobbying and interference and the political messing about of hon. Members, Ravenscraig would have been closed in the early 1980s. It has been kept alive only by that political pressure. If the Minister boasts of the guarantees that were extended politically by the Government on the one hand, he can hardly decry political interference on the other as being something associated with the public sector that is detrimental to BSC.
We have all heard the lesson before, but the ultimate irony of the statement that the Minister made in December was that it was couched in effusive congratulations—as was his speech earlier — for the record-breaking performance of BSC's workers, which is right. BSC made a profit of £190 million in 1987–88, which is an increase on the profit for 1986–87 of £187 million, and is in stark contrast to the massive losses of the 1970s. I have already mentioned the efforts of the Clydesdale work force, the ability of the Dalzell plate mill to produce a quality of steel that is unavailable elsewhere — which is vital to our defence industry—and the regular achievement of new production records at Ravenscraig.
During 1987, no fewer than nine of the 15 records for production in different parts of the plant were broken. Significantly, one of the only records that was not broken was that for the coke ovens, which was because no amount of physical ingenuity or effort of the workers could overcome the desperate need for further investment. Those factors explain the profits which now make the BSC such an attractive investment for the private sector.
Inherent in the Bill is the abdication of the Government's responsibility to steel workers and their communities. The potential effect of the productive rundown of the Scottish steel plants after privatisation would be disastrous for the communities to which they belong, not only to the steel workers. It is only natural that in highlighting those issues I should have concentrated on the interests of my constituents, but the implications of the Bill are bad for all steelmaking areas in the long term. This


cannot be seen as just a Scottish problem; it poses serious problems for workers, steel consumers and local communities throughout Britain. The transfer from public to private ownership will affect future investment and the strategic trading interests of the United Kingdom.
The Government may win the vote tonight, but the real decisions will be made by the British people over a much longer period. In the long run, the privatisation of steel will be judged not on whether it fits the dogma of Conservative Members, was mentioned in the Tory manifesto or fits the philosophy of free enterprise. Privatisation will be judged according to whether it advances the national interest, provides sufficient investment to maintain the industry, protects a strategic industry through short-term cyclical downturns, continues to satisfy the needs of customers and is responsive to the needs of employees and communities. By all those criteria, the Bill and its sponsors will be found wanting in the long run.

9 pm

Mr. Roy Hughes: I thought that my hon. Friend the Member for Motherwell, North (Dr. Reid) was filibustering. In making such a long speech, he has not advanced the cause of Ravenscraig.
his is the second time that the steel industry has been denationalised — or privatised, to give it its more fashionable description. I remind the Chancellor of the Duchy of Lancaster that the last time the steel industry was handed over to private enterprise it was hardly a success. The steel industry lagged behind its European counterparts in technological advancements and suffered from lack of investment, which is why the Labour Government renationalised it in 1967. The industry today, relatively speaking, is thriving, albeit in a slimmed down state.
The taxpayers provided the resources for the rescue operation and essential new investment, and it seems now that the City is hoping to reap the profits. The operation is being carried out with undue haste, first because although British Steel is presently on a high, the industry is cyclical and subject to booms and slumps. Secondly, the Government, in order to pursue their doctrinaire ambitions, must keep up the revenue from various privatisation measures. Steel, being profitable at present, can play its part in the process.
Little concern has been expressed about the sacrifices made by the work force. In 1976 BSC employed 210,000 people and it now employs 72,000. The communities in which steel workers live have suffered badly from closures and redundancies in the past decade. I recall the traumatic experiences at Llanwern in my constituency, culminating in the slim-line operation seven years ago. That works has risen like a phoenix from the ashes, and I pay tribute to Mr. Bill Harrison, the works director, who has done a wonderful job, as has the whole work force.
I find interesting the attitude of the BSC higher management to the Government proposals. This is one of the few occasions when I have to disagree with my right hon. Friend the Member for Blaenau Gwent (Mr. Foot)—after all, we are all a mirror of our experiences. To say that Sir Robert Scholey and the people surrounding him are in favour of the privatisation would be an understatement. Sir Robert Scholey has held important positions over the years in our publicly owned steel

industry, but he hardly seems to be a supporter of the principle of public ownership, if his recent utterances are anything to go by. Over the years some Opposition Members have questioned whether the industry was in the right hands. That is a lesson for a future Labour Government.
Sir Robert Scholey's henchman, Mr. Llowarch, at a meeting of the parliamentary Labour party's steel group which I attended, indicated that a privately owned British Steel Corporation, to maximise its profits, would reduce exports below the 40 per cent. now being achieved. That is hardly a patriotic sentiment, bearing in mind our parlous balance of trade. In the same vein, that gentleman believes that British Steel would prefer to reduce capacity to the level where it would have to import steel during periods of high demand in the United Kingdom economy. There is no need for steel workers to look into the crystal; they can read the book. They are being warned about what lies ahead.
Of course, the trade unions' attitude must be considered. Mr. Roy Evans, the general secretary of the ISTC, pointed out that the trade unions have always been in support of public ownership of the industry and have advocated it since the 1930s. That sentiment means little to the Government. I agree with the unions that privatisation should be as a single entity. At least we can be glad for small mercies because the Government appear to accept that principle.
What assurances can the Government give about job security for the future? The Chancellor of the Duchy skated over that issue. Would the Government rescue the steel industry if, yet again, it got into financial difficulties? There is the vital question of the pension rights of the work force, and thousands of people who have been forced to leave the industry. There is a good deal of concern over that issue. I know that there were tremendous problems with the privatisation of the royal ordnance factories. The Government should be more forthcoming. We certainly need more solid assurances.
The Bill marks the end of an era. It will put the industry back into all the uncertainties and inefficiencies of the past. It will have an unsettling effect on the steel communities throughout the country which have suffered so much in recent years. It is an unnecessary Bill and Opposition Members are quite right to oppose it.

Mr. Rhodri Morgan: I rise in my customary position as number eleven in the batting order to bring to the attention of the House some points which have already been made. I shall put them into context and I hope that the Minister will be able properly to consider them. I made some points in an intervention, but I am sure that he did not understand what I was trying to say.
My hon. Friend the Member for Newport, East (Mr. Hughes) referred to a meeting between the parliamentary Labour party steel group and the two most senior managers—the chairman and the chief executive—in the British Steel Corporation. We asked them what changes would be brought about by the privatisation of the industry in the style of management, in the options for investment and in the way they went about their business.
They made four points. My hon. Friend the Member for Newport, East has already mentioned that they thought an export quotient of 40 per cent. was too high and that if they wanted to maximise profit, they would


bring that down. Another point they made, which would have serious consequences for the balance of trade, was that they would not want to run the industry at a capacity capable of meeting all demands. It is a cyclical industry. They would want to use imports at times of big demand because that would be more profitable than maintaining a capacity which would cover all states of demand. I hope that the Minister will deal with the consequences of that for the balance of payments.
Thirdly, they mentioned that there would be an attempt to buy stockholders so as to reduce competition in the middleman sector of the industry. The Minister must give attention to that. Is this what privatisation is about—the reduction of competition in the wholesaling part of the industry? Does he give credence to that suggestion? Does he think that it is worth supporting? Is privatisation about taking greater control of the wholesale part of the industry? Will that be good for consumers or will it simply give greater power to manipulate prices for the benefit of profit but not for the consumers of steel?
The last point that they made was one that I think we would all agree with, that finishing end investment should take priority over steelmaking investment for the foreseeable future. That is not controversial.
In the last two or three weeks, in the press treatment of privatisation, two other mysterious announcements have been made by Sir Robert Scholey. I hope that the Minister will deal with these in his reply. The first is that he plans a lot of joint ventures with other EEC steelmakers. Again, will we see a great reduction in competition throughout Europe if future investment is not contemplated so much by the BSC on its own but only for joint ventures with the Italian, French or German steelmakers in plate mills, section mills or whatever? Will this lead to a reduction in competition which will not benefit consumers? After all, we hoped that privatisation might bring benefits for consumers, if the Government meant what they said.
There has also been a strange reference by Sir Robert to workers' shares. He has said that he wants some form of employee share ownership within the industry on a long-term basis, where workers would not have the option of selling their shares. We asked the steel unions if they knew anything about this and they said that BSC had not said a word to them. What kind of privatisation is it which is presented constitutionally to the House, with other bits being leaked to the press which have not been discussed properly with the trade unions? The impression is that the interests of the workers are paramount, yet the trade unions have not been consulted. Is it part of the kidology with which the measure is presented?
We are told that privatisation is supported by workers and that it will benefit consumers. Yet it will really mean a reduction in competition, and, through a phoney mechanism which has not been discussed with the trade unions, workers will be told, "You will love this. We will not ask your permission to do it but you will have funny money shares which you will not be able to sell. That is why we have not bothered to consult the trade unions about it, because they might have had strong views."
That is not a good way to approach the privatisation of such an important industry. It reveals that the Government are in a rush to privatise the steel industry. I was interested in the comments of the hon. Member for Taunton (Mr. Nicholson) who made the point that this was not in the Queen's Speech or in the Conservative manifesto. The measure has been brought in because of

problems with electricity and water privatisation. The hon. Member for Taunton was right to suspect that it has been slotted in well ahead of schedule, long before it was planned and long before it is proper from the point of view of investment. It is a rush job. There is every danger that it will be a botched job. For instance, for how long has the British Steel Corporation been making a profit? Roughly 18 months. Its finances are healthy and its performance has been magnificent. There is no question about that, but it has been in profit for only 18 months.
Would an investor honestly think it proper to take on an industry that has been in loss for most of the past 15 years and suddenly makes a profit once in that time? It has been helped by the fact that many of its investments have turned out to be very good and currency movements have turned in its favour, with the pound — deutschmark — dollar triangle working exactly right for most of BSC, barring the tubes division.
On the basis of 18 months' profitability, would it not have been proper to hang on for about three years of solid profitability before thinking about its sale? Its absence from the Conservative manifesto indicates that. There would be a much healthier price-earnings ratio after three or four years of continuous profits, and the investors and taxpayers could see how BSC had resisted changes in currencies and the trade cycle. If there is to be a downturn in the economy, as most commentators believe there will be next year or the year after, how will British Steel respond to that? Will it still be profitable, or is this sale an example of political opportunism, combined with "short-termism" in the City?
Although the Government will probably be able to sell British Steel this year, will they get the proper price for it? They will get the proper price only when purchasers can see three years or four years of continuous profitability. If the sale has to wait until the next general election, so much the better—for the taxpayers, who will know that they are getting the proper price, and for investors, who will know they can put a reasonable valuation on the industry. They would see that this is not just a fly-by-night job, dreamed up to fill the gap left this year because of the Government's difficulties with the privatisation of electricity, and because they do not know what to do about the nuclear power programme and the electricity industry, as they cannot privatise both. They are having difficulties with the water industry over splitting the regulatory side from manufacture. That is political opportunism. The Government needed a privatisation in this financial year. Steel made a good profit so the Government said, "Let us pull a rabbit out of a hat. Let us bring the steel industry down the slope to privatisation."
But the Government will not get a proper price-earnings ratio for the sale of BSC because the record of profitability is so short. That is why I believe privatisation now is an appalling way to deal with an asset of huge importance to taxpayers and, above all, to the communities that depend on it and the workers in the industry. This unholy rush will leave the management in charge of the industry and determined to shrink it for the sake of profit maximization, rather than to expand it for the good of the country's balance of payments, the communities, and the workers in the industry.

Mr. Donald Dewar: The debate started with the Minister mourning the fact that steel is the


stuff of political controversy and is very often in the eye of the storm and subject to pre-emptive strikes from Governments of the Left and the Right. I suppose that that is self-evidently true, but I am not sure that it advances the argument very far.
At times, this has been a slightly quaint debate. For example, the hon. Member for Darlington (Mr. Fallon) appeared momentarily in our midst to argue that those who work in the industry wanted it to be privatised. He offered personal testimony of that fact. I suspect that the hon. Member for Darlington is the sort of man who imagines that his constituents want the poll tax, so I am not entirely convinced by his arguments.
The Minister, in his opening, showed a touching interest in our intentions as a party when we return to power. I have to say to him that the question is not whether it is right to renationalise steel in a few years' time, but why we should privatise it now. Why sell off a major industry in the way that the Government propose? For the right hon. and learned Gentleman to complain about our political approach is a piece of cheek. He smells dogma in our midst. Considering the Prime Minister's ruthless charge, he doth protest too much.
I thought that the Chancellor of the Duchy was in a very illogical position. He gave much space to management achievements within British Steel and how it had triumphed despite what he described as the restraints of the public sector. He went on, very properly, to draw attention to the advances in productivity, efficiency, the export record and a very large number of factors in the undoubtedly excellent performance of the industry in recent years.
If that is common ground, the question that then shouts out for an answer, and was not answered, is why in those circumstances do we privatise. Is the industry unable to modernise itself? Has it got a poor efficiency rating? The answer, of course, is no, and the Minister very fairly said no. We have come through—and many Opposition Members almost personally bear the scars, at least in constituency terms — a dramatic, indeed a traumatic, period, with perhaps 1980 being the low point in that cycle. But in Consett, Corby, Scunthorpe and Workington, and in various places in Wales and Scotland, we have seen the most horrible and horrific social consequences of closure. These have been borne with considerable courage by those communities, which have worked through them, in many cases, to a position of success, which has been recorded in recent figures.
It is extraordinary to remember that in 1974 in my own area, in the south Clyde region, British Steel directly employed 24,500 people, and today it is under 5,000. If one looks at results—and again this point has been made—man hours per tonne of liquid steel have come down in eight years from over 14 to under six. As for profit—and the Minister referred to this with some satisfaction—in 1986–87 it was £178 million, and in the last half-year for which figures are available it was about £190 million.
So again I ask: why the change? Why plunge this industry into confusion and uncertainty? Why must we have privatisation when we have a successful steel industry that is beating some countries such as Germany, where it is already a private sector operation? It really is an odd belief that is offered by the Minister and one or two of his

supporters that in some way we want to do it because, while putting the industry into the private sector, we can sanitise it, withdraw it from political controversy and hand it over to the clean, ethical, sharper world of business.
Anyone who looks at the industry, at the politics of the European Economic Community and at the problems that will arise over steel quotas in the next few years will know that there are probably many sacrifices still to be made. There will certainly be attempts to force us into further cuts in capacity. In particular, there are difficult issues with the talk about contraction of another 7 million tonnes in European terms. It is living in the land of make-believe to imagine that somehow steel can be extracted from that political climate and handed over to commercial interests which will run it in some way beyond controversy and in tune with the wider needs of the country.
I do not think that the case has been made out, and certainly, as a Member who comes from Scotland and represents, in this at least, all the steelmaking areas, I can say that there is a deep resentment about the uncertainty and the difficulties that lie ahead after privatisation.
For Ravenscraig in particular—to concentrate on that for a minute or two — we have the so-called guarantee of steelmaking for a seven-year period. This has been presented on occasion as if it were immutable, bankable and copper-bottomed, but of course it is open to considerable qualification, as the Minister has conceded. It is "subject to market conditions", and the Minister says, after all, this was true of the old guarantee. But the difference is a fundamental one. As has been pointed out again and again by the right hon. and learned Member for Edinburgh, Pentlands (Mr. Rifkind) in his capacity as Secretary of State for Scotland, under the old arrangements, under the guarantee that is about to expire, it was a political decision that was keeping Ravenscraig safe. It was said again and again that if there was any threat it would have to be considered at Cabinet level. It was that political element, properly paraded as a badge of honour by the right hon. and learned Gentleman, that was the key to the matter.
If that is replaced by what is no more than a business projection in the private sector, without that political backing, it is an illusion to pretend that it is on the same basis as what has existed up to now. I do not believe for a moment that, without that political hold, we can face the future in a privatised steel industry with any great confidence.
I do not want to weary the House with a long history of the relationship between Ravenscraig and the management and higher management of British Steel. However, I was amazed that the Minister failed to understand that there was a problem of credibility in that respect. I do not think that he is a stupid man, although he is many other things. On this occasion, he was being disingenuous, and indeed probably perverse. Anyone—I do him the credit of assuming that he is someone in this respect — who has examined Select Committee reports over the past six or seven years, who has read the press reports and who has met and talked to Sir Robert Scholey, as many of my hon. Friends and I have done, knows that there is an inherent hostility and a feeling that there is an excess of capacity and that for all sorts of geographical and, perhaps, almost mythical traditional reasons it is assumed that Ravenscraig is the plant at risk.
Few believe that that situation will change as if by magic simply because privatisation has been brought in by


fiat of the Prime Minister. The hon. Member for Eastwood (Mr. Stewart) recognised that fact at least, and I am grateful to him. He said that the guarantees given were valuable. Perhaps we can compromise on that. They may be worth something, and I am relieved to hear, on the small print, that the guarantees will be included in the prospectus when privatisation comes, if we reach that stage.
I put it to the House that there is still a substantial problem that will not go away and to which any honest hon. Member representing steel interests will have to address himself. What happens now? Are we to turn over the steel industry—Ravenscraig and Dalzell in particular—to a future in which the profit motive rules and in which an opportunity to increase profits from £400 million to £500 million a year will be taken, whatever the social cost and the cost to the public interest? We must ask ourselves the genuine question how we can expect the directors of a public company to reconcile their loyalty to their duties under the Companies Acts with their wider social concerns and economic responsibilities to the community.
The best protection for Ravenscraig or any other steel plant in this country is the defeat of the Bill. Opposition Members aim to retain, if at all possible, a structure that allows sensible balanced decisions in the public interest to be made and controlled in the House. As realists, we have to face the fact that the scheme that the Minister has espoused may be bulldozed through, and there is no doubt that he is determined to pursue that course. If that happens, there will be a great deal of anxiety and dismay in my area and in many others.
I fully understand the arguments advanced by my hon. Friends the Members for Motherwell, North (Dr. Reid) and for Motherwell, South (Dr. Bray) about the report produced by Arthur Young. That report has been with us for only a few days but it is clearly intended as a serious contribution to the debate. It is right as a general principle that this House should consider every option if this misconceived scheme of privatisation is to be pushed through. As my hon. Friend the Member for Motherwell, North argued effectively and forcefully, it would be wrong to slam the door on any contribution to the debate before it has been properly examined, and the report cannot yet have been properly examined.
I resent the Minister's implication that those who have the genuine concerns of Ravenscraig at heart have been rushing around in a desperate search for someone to rubbish good news. If that were true, it would, indeed, be a cynical exercise. However, very few people view privatisation as good news and no one is interested in rubbishing anything. We are interested in finding correct solutions and some protection for a fundamental industry that provides the livelihood of a whole community.
Our opposition is fundamental. If privatisation goes ahead we shall continue to fight to save the industry—whether Ravenscraig or any other major plant. I must protest against the idea that the proper realism shown by my hon. Friends from all parts of the country about the difficulties and dangers should he condemned by Ministers as defeatism or an attempt at knocking copy. Again, it was the hon. Member for Eastwood who recognised the reality of the arguments and the difficulties. The sooner that that kind of common sense prevails in the thinking of

Government Front Bench spokesmen, the better for everyone in the debate and in the communities which depend upon the steel industry.
Of course, I accept, as was said by my hon. Friends the Members for Motherwell, North and for Motherwell, South that, with the closure of the hot mill at Ravenscraig, the whole plant will be in great difficulties. That is true. But we do not want the closure of that hot mill. Perhaps the Minister would turn his mind to his guarantee for strip production at Ravenscraig. He referred to 1989 with an air of pride, but 1989 is tomorrow for the steel industry in terms of its planning. The greatest contribution that he could make towards giving some credibility to his good intentions would be to take the decision now that strip mill production should continue at Ravenscraig.
Given British Steel's profitability and record, there is no case for the closure of major capacity. If I may pray in aid an unlikely ally for me, I was interested to see this week in The Economist—a magazine which is not hostile to the idea of privatisation; I would not pretend that it was that there is a survey of the industry and the article concludes:
That should not mean closing British plants, now efficiently run and unsubsidised.
That is right. There is no such case, whether it be in a nationalised or a privatised industry. That is our approach and that will be our attitude to any threat, whether it be in Ravenscraig or South Wales, in Teesside or any other part of the country where that threat may materialise.
The Under-Secretary of State has a number of questions to answer. There were some extraordinary doubts in the speech of the Chancellor of the Duchy of Lancaster, which was remarkable for what he did not have to say. My hon. Friend the Member for Dagenham (Mr. Gould) asked him specifically about the timetable and form of the flotation. It is right that the Minister should lift the lid of the box a little way and let us see what creepy crawlies are within. It is important that he should be a little franker than his senior colleague was about exactly what is proposed.
Several of my hon. Friends have properly pressed the Minister about the matter of control and ownership. For example, my hon. Friend the Member for Alyn and Deeside (Mr. Jones) fairly and frankly put the point of view of his work force and also raised the whole question of foreign ownership and control in a privatised industry.

Mr. Barry Jones: My hon. Friend also heard our views From Wales on what might happen with regard to organisation after privatisation.

Mr. Dewar: Yes, indeed. My hon. Friend made a concise and straightforward speech, as is his style, but the point that I was making concerned control and ownership and it is important that the Minister should say something about that.
We know from the statement made in December by the Chancellor of the Duchy of Lancaster that the control or restriction of foreign shareholdings did not instantly appeal. He said that almost in an aside. It is owed to us to know whether there have been second thoughts on that or whether that is the Minister's last word.
I can understand the scepticism of hon. Members from both sides of the House on this issue, given the Government's record. Indeed, that scepticism must be in a remarkably healthy state on the day in which the capitulation over the independence of Britoil has been


announced from the Dispatch Box. The whole concept of the golden share has been well and truly devalued. But there are, as my hon. Friend the Member for Dagenham said, other possibilities. For example, there is the 15 per cent. limit in the Rolls-Royce equity.
No one would question the fact that there is genuine public anxiety about the possibility of the kind of opportunistic raid upon a privatised British Steel Corporation that has been carried out, largely in conditions created by Government incompetence, by the Kuwaiti Investment Office on BP. It is important that the Government explain exactly where they stand, and, if the alarming silence in the Chancellor's speech is to be taken as meaning that there will be no control, no attempt at protection or safeguards, I must give warning that that is a serious matter which will be open to widespread criticism far beyond the Opposition Benches.
Our position on privatisation is clear. I make that point because, with all respect to the hon. Member for Gordon (Mr. Bruce)—whose speech entertained me greatly—I have to say that I had considerable difficulty in understanding where he, or indeed his party, stands on the privatisation issue. [Interruption.] I am a simple person: I simplify all great and complex matters, and I shall always think of his party as the Liberal party.
The hon. Gentleman outlined three or four options that might become relevant after privatisation, and was careful to make it clear that he advocated none of them. It may well be said that he could have advocated all of them, and what he said would have been as important and as relevant.
What I found even more remarkable was that the hon. Gentleman was very unclear about his attitude to privatisation itself. Fortunately, those of us with long memories can remember the Liberal party's election manifesto, and also the exchange of letters in Scotland between the right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel) and myself during the election. In a letter written on 18 May, the right hon. Gentleman made it clear that he was in favour of the privatisation of the steel industry. I suppose that that is no surprise. The Liberal amendment welcomes the Bill because
it paves the way for the successful flotation
of British Steel. After all that, all that I can do is congratulate the hon. Member for Gordon on managing to get himself into the right Lobby at the end of the day, for it seems to me that the confusion in that camp is remarkable.
Let me conclude by saying that I fear that the Government will show a brittle inflexibility on the issue. It is remarkable—this point was fairly made by the hon. Member for Taunton (Mr. Nicholson) — that no mention was made of the measure either in the election manifesto, which I had remembered, or in the Queen's Speech, which I had not remembered until he reminded me. I believe that it has been pushed through with indecent haste.
With a group of my Scottish colleagues, I went to meet the Chancellor of the Duchy of Lancaster shortly after his appointment, in the aftermath of the general election, and we went to see him again in January. He gave us some hope at that time. He went out of his way to say that strategic decisions about investment and structure in the steel industry would not be conditioned by privatization

considerations. The impression that was given was of a lengthy time scale. The right hon. and learned Gentleman did not disguise the fact that privatisation was at the end of the road as the Tories saw it, but our clear impression was that it was way down that road, perhaps several years away. That impression was gained not only by me but by all my hon. Friends at that meeting, many of whom are in the Chamber now.
It is extraordinary to discover that we are now debating the Second Reading of this Bill—a Bill which has been introduced with a haste which means that almost every interest will be bulldozed, and which will exclude any consultation, any imagination or understanding of the fears and problems that will arise. The only argument for the Bill can be stated in the language of short-term financial gain; there is no other logic. I also hold that it is hardly an honourable exercise, even in terms of popular capitalism.
I was amused by the suggestion of the Chancellor of the Duchy of Lancaster that investors would be able to form their own judgment on the merits of investment. What will really happen is a ruthless hard sell, glitzy and cynical, with all the ethics of the most primitive of market places—television, advertising and all the drama and promise of profit with no proper consideration of the risks and difficulties.
This is a shoddy measure which promises destabilising uncertainty. It is totally irrelevant to the real interests of the industry, and it is based on dogma. The Labour party is unequivocally, implacably opposed to it, and we shall vote accordingly.

Mr. Morgan: On a point of order, Mr. Speaker. Is it in order for the Chancellor of the Duchy of Lancaster to be licking and sealing 28 envelopes during a debate on a very important topic? Will it not give a very bad example to new Members such as myself—reverse Privy Councillors, as we like to refer to ourselves—and is there not an office for the purpose in the Duchy of Lancaster?

Mr. Holt: Further to that point of order, Mr. Speaker. Will you say that it is not in order for Opposition Members to eat in the Chamber?

Mr. Speaker: I hope that we shall all keep the standards of the Chamber.

The Parliamentary Under-Secretary of State for Industry (Mr. Robert Atkins): We have had an interesting debate today and to that extent I am delighted to be able to summarise it in the short time available to me. Indeed, I am pleased to have less time, because that has allowed other hon. Members of all parties to make speeches that they would not otherwise have had the chance to make.
I must confess that, having sat here throughout the whole debate, I am fascinated by the fact that although this was supposed to be one of the most controversial issues facing the Scottish Labour party, prior to the windup speech of the hon. Member for Glasgow, Garscadden (Mr. Dewar), there has not been what one might call a full complement of the Scottish Labour party present this evening.
To make progress, I should like to try to summarise the debate—[Interruption.] If Opposition Members would keep quiet, I might be able to answer some of the points that they have raised during the debate. If they are going


to shout all the way through, they will not get the answers until they choose to serve in Committee. The sooner they learn that, the better for all concerned.
The hon. Member for Dagenham (Mr. Gould), who opened the debate this afternoon for the Opposition, gave the lie to the new trendy Socialism to which I noticed the hon. Member for Garscadden referred at the culmination of his speech when he talked about "glitzy", show business, television, walking on cliff tops and a variety of other things. He even mentioned red roses which, dare I mention it, were pinched from my right hon. and learned Friend the Chancellor of the Duchy of Lancaster and those other Lancastrians who deserve to wear them—[Interruption.] It is no good Opposition Members ranting. I shall answer the debate in my own way, and if they do not like it they can do the other thing.
The hon. Member for Dagenham raised several questions to which he wanted answers. However, he will understand only to well that many of those questions cannot be answered immediately becaue, as he knows, the Bill is an enabling Bill, and not one to privatise the British Steel Corporation, as it is presently stated. In those circumstances, some of the questions that he asked—for example, about the date of flotation, pension arrangements and share arrangements generally — will be considered, answered and discussed in Committee when we get there.
However, there was one question about the so-called golden share. I emphasise what my right hon. and learned Friend stated: we think that there might be a case for an anti-takeover provision, but we are not yet persuaded that specific restrictions on foreign ownership are necessarily required. On consideration, that view may change, but at the moment that is what it is and what we believe it should be.
The hon. Member for Dagenham gave us the new Socialist leadership's views on life. He thinks that he might renationalise the British Steel Corporation, but does not know how. Despite the image of yuppie Socialism, he is still in favour of clause 4, but is not entirely certain what he will do, or how he will do it, if he comes to renationalise.
The hon. Gentleman suggested that the Ravenscraig-Shotton-Dalzell issue is not one for commercial judgment. We beg to differ. We think that the achievement of the British Steel Corporation has come about because of commercial judgment, which is why we believe it to be important.
My hon. Friend the Member for Pudsey (Sir G. Shaw), who apologised for not being here for the wind-up speeches this evening, made a speech that we all recognise as one of considerable knowledge, having held this post as the Minister responsible for the steel industry before the previous election. My hon. Friend welcomed the Bill and made an effective contribution, especially in his remarks about the hon. Member for Dagenham, whom he squashed most effectively. My hon. Friend, more than most, understands the industry. He asked questions about the European regime; the House will be aware that my right hon. and learned Friend will deal with that matter in detail after this debate.
My hon. Friend the Member for Pudsey and others asked about the so-called writing off of debts. Let me make one thing absolutely clear: no subsidies and no writing off of debts are involved. Anyone who says so has got it entirely wrong.
The hon. Member for Gordon (Mr. Bruce) thrashed around looking for options to evade the commitment that he gave in the alliance manifesto during the last election. The hon. Member for Garscadden also made reference to that. We—I suspect that Labour Members share our view—were conspicuously unimpressed by the difficulties he had in changing the view he held at the election. His performance summed up the many alliance and Liberal parties that we presently have in the House.
My hon. Friend the Member for Eastwood (Mr. Stewart) spoke with some knowledge and authority about the issues as he sees them. I intend to answer the points that he and other hon. Members have made.

Mr. David Winnick: The Chief Whip is making notes.

Mr. Atkins: It would help if Labour Members, having posed questions, tried to listen to the answers. At this time of the evening the House would expect a Minister to try to answer the debate. People who have made contributions deserve comment upon them. Labour Members who have asked questions will get some answers if they belt up. [HON. MEMBERS: "Oh!"]
The right hon. Member for Blaenau Gwent (Mr. Foot), who has an emotional and lifelong commitment to nationalisation, made a speech with which I cannot take great issue because of his stance over the years. We will just have to agree to differ over the conclusions he draws. I defer to his experience and knowledge in this issue because he represents a steel constituency and he speaks with authority on the matter. None the less, I disagree with him.
Much reference has been made to the Arthur Young report. The Young report looked at the Ravenscraig-Shotton-Dalzell option, but without, as hon. Members on both sides of the House have said, all the facts. Because of the commercial confidentiality involved in providing the information to Arthur Young, my right hon. and learned Friend believed that it was not right to provide all the facts, and I agree.
It must be borne in mind that the Government must look at the industry as a whole, whereas Arthur Young was commissioned to look at the industry as it particularly related to the Ravenscraig-Shotton-Dalzell option. Incidentally, even the Arthur Young report commented that there was no need for substantial capital expenditure on the RSD option over the next five years. Reference was made earlier to the fact that there should be more capital investment, but even Arthur Young has discounted that argument.
For reasons of confidentiality, Arthur Young was not privy to all the information available to BSC, the DTI and its professional advisers. The Department and its advisers had no hard and fast rule in the early stages about the break-up or whether the corporation should be sold as a single entity. Indeed, Samuel Montagu, which examined the matter closely in the spring and autumn last year, made it quite clear in its conclusions that it was firmly against the break-up of the corporation.
Throughout the debate, reference has been made, especially by the hon. Members for Motherwell, North (Dr. Reid) and for Motherwell, South (Dr. Bray), to the involvement of Shotton in the RSD option. I can do no better than to reiterate what the hon. Member for Alyn and Deeside (Mr. Jones) said, in a number of interventions


supported by other hon. Members representing Welsh constituencies, in supporting what Mr. Joe Gibson, the chairman of the joint unions committee at Shotton, said:
We feel that our destiny must continue to lie with the big unified BSC and not with any carved-up small units as suggested. We feel that this would be in our best interest and probably be so in the long run for Ravenscraig too.
We see our future as staying with the corporation rather than splinter groups. We are happy about our future and we have expansion and good investment".
That effectively destroys the arguments by Scottish Members, including the hon. Members for Motherwell, South and for Motherwell, North. The unions disagree with them.

Dr. Bray: rose—

Mr. Atkins: Time is pressing, and I should move on. It is also the case—

Dr. Bray: rose—

Mr. Speaker: Order. If the Minister does not give way, hon. Members must not persist.

Mr. Atkins: It is also the case that the executive of the ISTC—

Dr. Bray: Chicken.

Mr. Speaker: Order. It is no good hon. Members shouting in that disgraceful way.

Mr. Atkins: The hon. Gentleman is behaving like a headless chicken.
It is also the case that the executive of the local ISTC rejected the studies sponsored by Motherwell district council and backed by local Members of Parliament. Supporters of the idea argued that it would make for a viable, integrated company and remove doubts about the plant's future, but union representatives, particularly from Shotton, doubt the scheme's feasibility. The executive argued that, if British Steel is to be privatised, it should be sold as a single unit. [Interruption.] Opposition Members may not like that, but I am only telling them what they have already been told and what has been expressed publicly by Opposition Members from Wales about what they think of the division as proposed in the Arthur Young report. Hon. Members may not like it, but it happened to be the case.
Let me remind the House of the solemn assurance given by the BSC in December:
Subject to market conditions, BSC expects that there will continue to be a commercial requirement for steel making and continuous casting capacity of the five integrated plants for at least the next seven years.
That is exactly the same as in the previous two three-year extensions.
My right hon. and learned Friend the Chancellor of the Duchy of Lancaster was right when he suggested that the Labour party is turning over every stone in an attempt to find something nasty to say about the very plant that it wants to keep open. The hon. Member for Motherwell, South has even resorted to seeking advice from so-called Right-wing groups, such as the Institute of Economic Affairs and the Adam Smith Institute. It seems slightly odd that he has to resort to his opponents to try to justify his case. The continual knocking of Ravenscraig and what it stands for is scarcely likely to help Opposition Members, but that is largely what we have come to expect from them.
About a month ago, I had the honour to lead a trade mission to Poland, during the course of which I visited Huta Lenina, which is the largest steelworks in the country. It employs over 30,000 people, using equipment more than 30 years out of date. Some of the expert business men who were in the mission with me reckoned that the figure of 30,000 could be cut to 10,000 because that was all that was needed to run the plant more productively, effectively and profitably. [Interruption.]

Mr. Speaker: Order. I ask the House to listen to what the Minister has to say.

Mr. Atkins: The Poles who met us at the steelworks wanted to know about the British Steel Corporation and why it had achieved such efficiency. They wanted to know what equipment the British Steel Corporation was using — [Interruption.] I am fascinated by Opposition Members. They have made great play of the Bill being controversial and of how concerned and upset they are, and all they can do is giggle and laugh about the issues that they claimed were serious. That sums up the fraudulent, synthetic opposition to this important Bill. We shall not forget the attitude Opposition Members are adopting—[Interruption.]

Mr. Speaker: Order. I must ask the House to listen to the Minister answering the debate.

Mr. Atkins: The attitude of the Poles who were running a steel works to the success of the British Steel Corporation is a measure of the scale of the achievement of the work force and management of the corporation and one of the chief reasons why it is right that the corporation should once again be returned to the private sector.
During the debate on the nationalisation of steel in May 1965, the then Minister of Power, Mr. Fred Lee, took as a central theme the following:
The crucial test of our proposals is whether they are well designed to meet the challenge of the future to which I have been referring.
A subvention by Government and taxpayers of £8·6 billion in public dividend capital since 1967 suggests that those proposals were not as well designed as that Minister suggested.
Later in the same debate, which I had the pleasure of watching from the Gallery, in a rare flash of farsightedness, George Brown said:
It has always seemed to me that if it is attempted to impose State control on people who have to earn their living by reference to the profit motive, one is bound to get the worst of all worlds."—[Official Report, 6 May 1965; Vol. 711, c. 1582, 1689.]
So it has proved.
If I may return to the theme of the speech made by my right hon. and learned Friend in opening the debate, British Steel must be given the freedom to take its own business decisions. It needs that freedom if it is to be sure of building on the solid commercial base it has now created for itself. It needs to know that it can take decisions quickly, without having to revert to Government at every turn. It needs flexibility and independence if it is to withstand pressure of an increasingly competitive international market. The British Steel Corporation has made outstanding progress in recent years. It has transformed its business into a modern, efficient and profitable organisation, which can compete successfully in world markets.
Hon. Members who understand the steel industry know full well what has been achieved in recent years. If they


deny the success of the achievements of the work force and management, they fly in the face of the facts. I recognise that the corporation was not restored to health without a painful process of rationalisation; it would have been less painful, perhaps, if the necessary steps had not been shortsightedly delayed. My right hon. and learned Friend has described the efforts that have been made and the splendid results that have been achieved. I join him in congratulating the management and work force of the corporation on those results.
A number of the points raised by right hon. and hon. Members on both sides deserve and will get consideration as the Bill goes through Committee. But our record on privatisation, of British Aerospace and a variety of other companies—Rolls-Royce, the British Airports Authority—has been more successful than anyone would have expected, and gives the lie to the suggestion by Opposition Members that the British Steel Corporation will be anything less than a great success in the private sector. The time has come to embark on the next step in the transformation of the corporation into a successful commercial enterprise and to return British Steel to its right and proper place—the private sector. The Bill will pave the way for that step, and I commend it to the House.
Question put, That the Bill be now read a Second time: —

The House divided: Ayes 280, Noes 219.

Division No. 192]
[9.59 pm


AYES


Amos, Alan
Dicks, Terry


Arbuthnot, James
Dorrell, Stephen


Arnold, Jacques (Gravesham)
Douglas-Hamilton, Lord James


Arnold, Tom (Hazel Grove)
Dover, Den


Atkins, Robert
Dunn, Bob


Baker, Rt Hon K. (Mole Valley)
Durant, Tony


Baker, Nicholas (Dorset N)
Dykes, Hugh


Banks, Robert (Harrogate)
Eggar, Tim


Barnes, Mrs Rosie (Greenwich)
Emery, Sir Peter


Batiste, Spencer
Evans, David (Welwyn Hatf'd)


Bennett, Nicholas (Pembroke)
Evennett, David


Bevan, David Gilroy
Fallon, Michael


Biffen, Rt Hon John
Farr, Sir John


Boscawen, Hon Robert
Favell, Tony


Bottomley, Mrs Virginia
Fenner, Dame Peggy


Bowis, John
Field, Barry (Isle of Wight)


Brandon-Bravo, Martin
Fookes, Miss Janet


Buchanan-Smith, Rt Hon Alick
Forman, Nigel


Burt, Alistair
Forsyth, Michael (Stirling)


Butler, Chris
Forth, Eric


Butterfill, John
Fowler, Rt Hon Norman


Carrington, Matthew
Fox, Sir Marcus


Cartwright, John
Franks, Cecil


Chalker, Rt Hon Mrs Lynda
Freeman, Roger


Chapman, Sydney
Fry, Peter


Chope, Christopher
Gale, Roger


Churchill, Mr
Gardiner, George


Clark, Dr Michael (Rochford)
Garel-Jones, Tristan


Clark, Sir W. (Croydon S)
Gill, Christopher


Clarke, Rt Hon K. (Rushcliffe)
Gilmour, Rt Hon Sir Ian


Colvin, Michael
Goodhart, Sir Philip


Conway, Derek
Goodlad, Alastair


Coombs, Anthony (Wyre F'rest)
Goodson-Wickes, Dr Charles


Coombs, Simon (Swindon)
Gow, Ian


Cope, John
Gower, Sir Raymond


Cormack, Patrick
Grant, Sir Anthony (CambsSW)


Couchman, James
Greenway, Harry (Ealing N)


Currie, Mrs Edwina
Greenway, John (Ryedale)


Curry, David
Gregory, Conal


Davies, Q. (Stamf'd &amp; Spald'g)
Griffiths, Sir Eldon (Bury St E')


Davis, David (Boothferry)
Griffiths, Peter (Portsmouth N)


Day, Stephen
Grist, Ian


Devlin, Tim
Ground, Patrick


Dickens, Geoffrey
Gummer, Rt Hon John Selwyn





Hamilton, Neil (Tatton)
Montgomery, Sir Fergus


Hampson, Dr Keith
Morris, M (N'hampton S)


Hanley, Jeremy
Morrison, Hon Sir Charles


Hannam, John
Morrison, Hon P (Chester)


Hargreaves, A. (B'ham H'll Gr')
Moss, Malcolm


Hargreaves, Ken (Hyndburn)
Moynihan, Hon Colin


Harris, David
Mudd, David


Haselhurst, Alan
Neale, Gerrard


Hawkins, Christopher
Neubert, Michael


Hayward, Robert
Newton, Rt Hon Tony


Heathcoat-Amory, David
Nicholls, Patrick


Heddle, John
Nicholson, David (Taunton)


Hicks, Mrs Maureen (Wolv' NE)
Nicholson, Emma (Devon West)


Higgins, Rt Hon Terence L.
Onslow, Rt Hon Cranley


Hill, James
Oppenheim, Phillip


Hind, Kenneth
Owen, Rt Hon Dr David


Hogg, Hon Douglas (Gr'th'm)
Paice, James


Holt, Richard
Patnick, Irvine


Howard, Michael
Patten, John (Oxford W)


Howarth, G. (Cannock &amp; B'wd)
Pattie, Rt Hon Sir Geoffrey


Howell, Rt Hon David (G'dford)
Pawsey, James


Howell, Ralph (North Norfolk)
Peacock, Mrs Elizabeth


Hughes, Robert G. (Harrow W)
Porter, Barry (Wirral S)


Hunt, David (Wirral W)
Porter, David (Waveney)


Hunt, John (Ravensbourne)
Portillo, Michael


Hurd, Rt Hon Douglas
Powell, William (Corby)


Irvine, Michael
Price, Sir David


Irving, Charles
Raffan, Keith


Jack, Michael
Raison, Rt Hon Timothy


Jackson, Robert
Rathbone, Tim


Janman, Tim
Redwood, John


Jessel, Toby
Renton, Tim


Johnson Smith, Sir Geoffrey
Rhodes James, Robert


Jones, Gwilym (Cardiff N)
Rhys Williams, Sir Brandon


Jones, Robert B (Herts W)
Riddick, Graham


Kellett-Bowman, Dame Elaine
Ridley, Rt Hon Nicholas


Key, Robert
Ridsdale, Sir Julian


Kilfedder, James
Rifkind, Rt Hon Malcolm


King, Roger (B'ham N'thfield)
Roberts, Wyn (Conwy)


Kirkhope, Timothy
Rossi, Sir Hugh


Knapman, Roger
Rost, Peter


Knight, Greg (Derby North)
Rowe, Andrew


Knox, David
Rumbold, Mrs Angela


Lamont, Rt Hon Norman
Ryder, Richard


Lang, Ian
Sackville, Hon Tom


Latham, Michael
Sayeed, Jonathan


Lawrence, Ivan
Scott, Nicholas


Lee, John (Pendle)
Shaw, David (Dover)


Leigh, Edward (Gainsbor'gh)
Shaw, Sir Giles (Pudsey)


Lennox-Boyd, Hon Mark
Shaw, Sir Michael (Scarb')


Lightbown, David
Shephard, Mrs G. (Norfolk SW)


Lilley, Peter
Shepherd, Colin (Hereford)


Lloyd, Sir Ian (Havant)
Shepherd, Richard (Aldridge)


Lloyd, Peter (Fareham)
Shersby, Michael


Lord, Michael
Sims, Roger


Lyell, Sir Nicholas
Skeet, Sir Trevor


Macfarlane, Sir Neil
Smith, Tim (Beaconsfield)


MacKay, Andrew (E Berkshire)
Soames, Hon Nicholas


Maclean, David
Speed, Keith


McLoughlin, Patrick
Speller, Tony


McNair-Wilson, M. (Newbury)
Spicer, Sir Jim (Dorset W)


McNair-Wilson, P. (New Forest)
Spicer, Michael (S Worcs)


Madel, David
Squire, Robin


Malins, Humfrey
Stanbrook, Ivor


Mans, Keith
Steen, Anthony


Marshall, John (Hendon S)
Stevens, Lewis


Marshall, Michael (Arundel)
Stewart, Allan (Eastwood)


Martin, David (Portsmouth S)
Stewart, Andy (Sherwood)


Mates, Michael
Stokes, John


Maude, Hon Francis
Stradling Thomas, Sir John


Mawhinney, Dr Brian
Sumberg, David


Maxwell-Hyslop, Robin
Summerson, Hugo


Mayhew, Rt Hon Sir Patrick
Tapsell, Sir Peter


Meyer, Sir Anthony
Taylor, Ian (Esher)


Miller, Hal
Taylor, John M (Solihull)


Mills, Iain
Taylor, Teddy (S'end E)


Miscampbell, Norman
Tebbit, Rt Hon Norman


Mitchell, Andrew (Gedling)
Temple-Morris, Peter


Mitchell, David (Hants NW)
Thompson, D. (Calder Valley)


Monro, Sir Hector
Thompson, Patrick (Norwich N)






Thorne, Neil
Watts, John


Thornton, Malcolm
Wheeler, John


Thurnham, Peter
Whitney, Ray


Townend, John (Bridlington)
Widdecombe, Ann


Townsend, Cyril D. (B'heath)
Wiggin, Jerry


Tracey, Richard
Wilshire, David


Tredinnick, David
Winterton, Mrs Ann


Twinn, Dr Ian
Winterton, Nicholas


Vaughan, Sir Gerard
Wolfson, Mark


Waddington, Rt Hon David
Wood, Timothy


Wakeham, Rt Hon John
Woodcock, Mike


Walden, George
Yeo, Tim


Walker, Bill (T'side North)
Young, Sir George (Acton)


Walker, Rt Hon P. (W'cester)
Younger, Rt Hon George


Waller, Gary



Ward, John
Tellers for the Ayes:


Wardle, Charles (Bexhill)
Mr. Alan Howarth and


Warren, Kenneth
Mr. Kenneth Carlisle.


NOES


Abbott, Ms Diane
Dunnachie, Jimmy


Allen, Graham
Dunwoody, Hon Mrs Gwyneth


Alton, David
Eadie, Alexander


Anderson, Donald
Eastham, Ken


Archer, Rt Hon Peter
Evans, John (St Helens N)


Armstrong, Hilary
Ewing, Harry (Falkirk E)


Ashdown, Paddy
Ewing, Mrs Margaret (Moray)


Ashley, Rt Hon Jack
Fatchett, Derek


Ashton, Joe
Faulds, Andrew


Banks, Tony (Newham NW)
Fearn, Ronald


Barnes, Harry (Derbyshire NE)
Fields, Terry (L'pool B G'n)


Barron, Kevin
Fisher, Mark


Battle, John
Flannery, Martin


Beckett, Margaret
Flynn, Paul


Bell, Stuart
Foot, Rt Hon Michael


Benn, Rt Hon Tony
Foster, Derek


Bennett, A. F. (D'nt'n &amp; R'dish)
Foulkes, George


Bermingham, Gerald
Fraser, John


Bidwell, Sydney
Fyfe, Maria


Blair, Tony
Galbraith, Sam


Blunkett, David
Garrett, John (Norwich South)


Boateng, Paul
Garrett, Ted (Wallsend)


Boyes, Roland
Gilbert, Rt Hon Dr John


Bradley, Keith
Godman, Dr Norman A.


Bray, Dr Jeremy
Golding, Mrs Llin


Brown, Gordon (D'mline E)
Gould, Bryan


Brown, Nicholas (Newcastle E)
Graham, Thomas


Brown, Ron (Edinburgh Leith)
Grant, Bernie (Tottenham)


Bruce, Malcolm (Gordon)
Griffiths, Nigel (Edinburgh S)


Buchan, Norman
Griffiths, Win (Bridgend)


Buckley, George J.
Grocott, Bruce


Caborn, Richard
Hardy, Peter


Callaghan, Jim
Harman, Ms Harriet


Campbell, Ron (Blyth Valley)
Hattersley, Rt Hon Roy


Campbell-Savours, D. N.
Heffer, Eric S.


Clark, Dr David (S Shields)
Henderson, Doug


Clarke, Tom (Monklands W)
Hinchliffe, David


Clay, Bob
Hogg, N. (C'nauld &amp; Kilsyth)


Clelland, David
Home Robertson, John


Clwyd, Mrs Ann
Hood, Jimmy


Coleman, Donald
Howarth, George (Knowsley N)


Cook, Frank (Stockton N)
Howell, Rt Hon D. (S'heath)


Cook, Robin (Livingston)
Howells, Geraint


Corbett, Robin
Hoyle, Doug


Cousins, Jim
Hughes, John (Coventry NE)


Cox, Tom
Hughes, Robert (Aberdeen N)


Crowther, Stan
Hughes, Roy (Newport E)


Cryer, Bob
Hughes, Sean (Knowsley S)


Cunliffe, Lawrence
Hughes, Simon (Southwark)


Cunningham, Dr John
Illsley, Eric


Dalyell, Tam
Ingram, Adam


Darling, Alistair
Janner, Greville


Davies, Ron (Caerphilly)
John, Brynmor


Davis, Terry (B'ham Hodge H'l)
Johnston, Sir Russell


Dewar, Donald
Jones, Barry (Alyn &amp; Deeside)


Dixon, Don
Kaufman, Rt Hon Gerald


Dobson, Frank
Kinnock, Rt Hon Neil


Doran, Frank
Kirkwood, Archy


Douglas, Dick
Lambie, David


Duffy, A. E. P.
Lamond, James





Leadbitter, Ted
Randall, Stuart


Leighton, Ron
Redmond, Martin


Lewis, Terry
Rees, Rt Hon Merlyn


Litherland, Robert
Reid, Dr John


Livingstone, Ken
Richardson, Jo


Livsey, Richard
Roberts, Allan (Bootle)


Lloyd, Tony (Stretford)
Robertson, George


Lofthouse, Geoffrey
Robinson, Geoffrey


McAllion, John
Rogers, Allan


McAvoy, Thomas
Rooker, Jeff


McCartney, Ian
Ross, Ernie (Dundee W)


Macdonald, Calum A.
Rowlands, Ted


McFall, John
Ruddock, Joan


McKay, Allen (Barnsley West)
Salmond, Alex


McKelvey, William
Sedgemore, Brian


McLeish, Henry
Sheerman, Barry


McNamara, Kevin
Sheldon, Rt Hon Robert


McTaggart, Bob
Shore, Rt Hon Peter


McWilliam, John
Short, Clare


Madden, Max
Skinner, Dennis


Mahon, Mrs Alice
Smith, Andrew (Oxford E)


Marshall, David (Shettleston)
Smith, C. (Isl'ton &amp; F'bury)


Marshall, Jim (Leicester S)
Smith, Rt Hon J. (Monk'ds E)


Martin, Michael J. (Springburn)
Snape, Peter


Martlew, Eric
Soley, Clive


Maxton, John
Spearing, Nigel


Meacher, Michael
Steinberg, Gerry


Meale, Alan
Stott, Roger


Michael, Alun
Strang, Gavin


Michie, Bill (Sheffield Heeley)
Straw, Jack


Michie, Mrs Ray (Arg'l &amp; Bute)
Taylor, Mrs Ann (Dewsbury)


Miilan, Rt Hon Bruce
Taylor, Matthew (Truro)


Mitchell, Austin (G't Grimsby)
Thompson, Jack (Wansbeck)


Moonie, Dr Lewis
Turner, Dennis


Morgan, Rhodri
Vaz, Keith


Morley, Elliott
Wall, Pat


Morris, Rt Hon A. (W'shawe)
Wallace, James


Morris, Rt Hon J. (Aberavon)
Wardell, Gareth (Gower)


Mowlam, Marjorie
Welsh, Andrew (Angus E)


Mullin, Chris
Wigley, Dafydd


Murphy, Paul
Williams, Rt Hon Alan


Nellist, Dave
Williams, Alan W. (Carm'then)


Oakes, Rt Hon Gordon
Wilson, Brian


O'Brien, William
Winnick, David


O'Neill, Martin
Wise, Mrs Audrey


Orme, Rt Hon Stanley
Worthington, Tony


Patchett, Terry
Wray, Jimmy


Pendry, Tom



Pike, Peter L.
Tellers for the Noes:


Primarolo, Dawn
Mr. Frank Haynes and


Quin, Ms Joyce
Mr. Ray Powell.


Radice, Giles

Question accordingly agreed to.

Bill read a Second time, and committed to a Standing Committee pursuant to Standing Order No. 61 (Committal of Bills).

Orders of the Day — BUSINESS OF THE HOUSE

Ordered,
That, at this day's sitting, the Ways and Means Motion may be proceeded with, though opposed, until any hour.—[Mr. Lennox-Boyd.]

Orders of the Day — BRITISH STEEL BILL [MONEY]

Queen's Recommendation having been signified—

Resolved,
That, for the purposes of any Act resulting from the British Steel Bill, it is expedient to authorise—

(a) the payment out of money provided by Parliament of—

(i) any expenses incurred by the Treasury or the Secretary of State in acquiring securities of the successor company (within the meaning of the Act) or rights to subscribe for any such securities;


(ii) any administrative expenses incurred by the Secretary of State in consequence of the provisions of the Act;

(b) the payment out of the National Loans Fund of any sums required by the Secretary of State for making loans to the successor company. — [Mr. Lennox-Boyd.]

Orders of the Day — WAYS AND MEANS

BRITISH STEEL BILL

Resolved,
That, for the purposes of any Act resulting from the British Steel Bill, it is expedient to authorize—

(a) the imposition of charges to corporation tax by provisions of the Act relating to the restriction of tax losses available to the successor company (within the meaning of the Act);
(b) the payment of any sums into the Consolidated Fund or the National Loans Fund. — [Mr. Lennox-Boyd.]

Steel

The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Kenneth Clarke): I beg to move,
That this House takes note of European Community Documents Nos. 8560/87, the Supplementary Explanatory Memorandum submitted by the Department of Trade and Industry on 1st December 1987 and 4127–88 on steel policy, 8803/86 and the proposals described in unnumbered Explanatory Memoranda submitted by the Department of Trade and Industry on 7th July 1986 and 15th July 1986 on trade with the United States of America in certain steel products, 8993/86 and COR 1 on aids to the steel industry (1984–85), and the proposals described in the unnumbered Explanatory Memorandum submitted by the Department of Trade and Industry on 19th October 1987 on delivery levels of certain steel products of Spanish and Portuguese origin onto the rest of the Community market; supports the Government's commitment to a Community steel regime which provides a framework for a steady return to free market conditions; and endorses the Government's agreement of measures which place a temporary limit on steel exports to the United States of America, thus safeguarding access to the American market.
As the House has now satisfactorily sorted out the problems of the British Steel Corporation privatisation, it is obviously a suitable occasion to go on to this debate where we concentrate on the international, particularly European, aspects of the steel market. [Interruption.]

Mr. Speaker: Order. Will hon. Members, particularly those beyond the Bar, who are not staying for the debate please leave quietly?

Mr. Clarke: The debate arises from four European Community documents and four explanatory memoranda relating to the steel industry, which have been recommended for debate by the Select Committee on European Legislation. I apologise to the House for the fact that it was necessary in the best interests of the United Kingdom to agree to decisions on two measures, those concerning the future European Coal and Steel Community steel regime, and the RESIDER programme, before a debate could be arranged. Hon. Members who have followed the decisions that we took at the Council meetings before Christmas will accept that on both subjects the Government entered into an agreement which is non-controversial and is accepted on both sides of the House as in the overall interests of the United Kingdom and the steel community.
The documents as a whole deal with the international steel regime. The most important subject which they cover is the European steel regime based on quota shares of the market and an arrangement which protects steel producers against a catastrophic fall in prices. The European quota regime was introduced a few years ago when the European steel industry was going through a period of acute crisis. The regime is generally a tribute to the work of Commissioner Davignon and was brought into play at a time when there was huge excess capacity throughout the European Community. Prices were at risk of collapsing altogether. The likely reaction to a collapse of market prices at that time would have been that the various member states would have gone in for a competitive arrangement whereby each tried to cover the losses of its own industry, and they competed with each other by offering subsidies to try to sustain their industries.
The purpose of the system when it was introduced was to try to keep supply and demand roughly in balance to prevent prices from falling to ruinous levels while surplus capacity was removed. The arrangement was always meant to be temporary; it was never intended to be timeless. The aim was to try to create orderly marketing arrangements within the European Community to win time for the necessary changes to take place and for restructuring to be carried through.
As is so often the case with temporary arrangements, the arrangements have lasted for some years. In my discussions with my European colleagues, whether they be Ministers from other member states or people connected with other sections of the European steel industry, I find that inevitably some people are from time to time tempted to regard a quota regime as being desirable in the longer term. Certainly there are those within the steel industry who like to think of the industry as one which is naturally cartelised and is best arranged on that basis. It has the attraction, particularly for the weaker steel producers, that by such means prices are kept artificially high and the businesses can be kept open at levels of capacity far above those which would be necessary for viability if open market conditions were ever restored.
It is certainly not my view that the regime should be permanent or that cartel systems are desirable in anyone's interests. I do not think that it is in the interest of steel producers to try to share markets between basically inefficient producers. Certainly it would not be in the interests of steel users, and we must remember that in this economy, as in any other, more jobs are created by the use of steel than by its production. Anything which artificially inflates the price of steel from the steel producers is of no advantage to the general economy of Britain or Europe.
Therefore, once the temporary arrangements have served their purpose, it is necessary to go back to the reasonably free market conditions described by my hon. Friend the Member for Pudsey (Sir G. Shaw) in the previous debate as desirable and in the interests of consumers and the industry generally. We have reached a stage where the system is beginning to cause more harm than advantage from the British viewpoint. Consumers face higher prices than they would otherwise do, and sometimes encounter shortages, and certainly constraints on the supply of the raw material because of the quota effects on the market.

Mr. Richard Caborn: That is the effect of the European Community.

Mr. Clarke: I agree with the hon. Gentleman that that is the great danger. When I meet some of the more robust defenders of the quota arrangements in the European Community, they seem to believe that we should set up a sheepmeat regime for the steel industry as a long-term process. The Government are against that proposal, as it is not in anybody's interests; nor is it in the interests of BSC.
In tonight's Second Reading debate I think we all agreed, in discussing the interests of the BSC, that it will thrive in freer market conditions. It is now among the most profitable and efficient steel producers in western Europe. Indeed, BSC's production costs are substantially lower than those in the United States of America, and in other leading European steel-producing countries. We are


looking for a return, in the most orderly fashion possible and as quickly as possible, to essentially free market conditions.
A key problem, however, which is at the root of our debates this evening and on other occasions about the arrangements dealt with in the documents before us is over-capacity. The European market remains dogged by massive over-capacity in European steel production, which means that plant is still in place, providing only temporary jobs, and capable of producing steel that can never be sold in a free market. That is so even after the great restructuring of recent years. Over-capacity is estimated by the European Commission at 30 million tonnes, which is not much less than the amount of overcapacity already cut out as a result of processes in the past six years.
There were reductions of 32 million tonnes between 1980 and 1986, which I shall not trouble the House with this evening. We have made substantial progress in the past two years. Coated sheet and reinforcing bar were liberalised from quota from the beginning of 1986. Galvanised sheet was also liberalised at the beginning of 1987, and, on the Commission's proposal, we finally liberalised wire, rod and merchant bar, which are known in the trade as light long products, from 1 January 1988. The quotas are steadily being removed.
BSC is now the only company in the country affected by quotas, as the private sector steel producers are not affected by them any more. The great problem that remains concerns products usually described as flat products, such as hot rolled coil, cold reduced sheet and plate and also heavy sections. In those products, there is over-capacity of about 21 million tonnes out of the total of 30 million tonnes that I referred to.
Originally, the Commission proposed for these products a new production quota system from 1 January 1988 to last for three years. I was not the only Minister who found the original Commission proposals distinctly unattractive. That was the starting point of discussions by the Council of Ministers before Christmas 1987. I am glad to say that they reached agreements that will bring us steadily closer to the end of the quota system, on terms that we would find acceptable and attractive.
The discussions at the Council of Ministers on 21 September 1987, which was the first meeting that I attended after the long recess, brought unanimous agreement that substantial excess capacity still remained in Europe. The Ministers at least agreed on that as a good starting point, and it was decided that new quota arrangements should not be established for 1988 and beyond unless enough guarantees of capacity cuts were reached to ensure the future viability of the European steel industry. Having agreed that we saw no case for quotas continuing without excess capacity being reduced, I regret to say that in September there was little prospect of the Ministers present at the meeting agreeing on how that excess capacity should go.
Therefore, the Council agreed that we would invite the Commission to appoint three persons, who almost inevitably became known as the "three wise men", to advise by mid-November on how adequate commitments might be obtained. The idea of going to three outsiders with industrial experience certainly appealed to me. It was a German proposition put forward by the German

Minister Martin Bangemann, and strongly supported by me on behalf of the United Kingdom. The three wise men thus began their consultations.
After the consultations with steel producers and Governments, the wise men reported that firms were not ready to give commitments to the level of capacity reductions that were being sought. They failed to come up with the necessary commitments. I am glad to say that the wise men recommended a phasing out of quotas to provide a gradual return to a free market.
That was the background to the Council of Ministers which I attended on 8 December, which considered revised proposals from the Commission along the lines of the wise men's recommendations. Quotas for flat products and heavy sections would be phased out over a six-month period, but with a possible extension until 1990 for some products if adequate guarantees of restructuring could be obtained.
In that Council I pressed for the earliest practicable return to a free market and for progress with the further restructuring which was necessary for the long-term stability of the market. The Council at that stage simply deferred the final decision on the future steel regime to a further Council meeting to be held on 22 December. The Commission was asked to make a further effort itself to secure from Governments clear and credible indications of willingness to reduce capacity by a sufficient amount. That took us to 22 December.
At that stage, after a long discussion, the majority of the Council were satisfied that we had at least got promising indications of willingness to remove excess capacity in plate and heavy sections, but some members, including me on behalf of the United Kingdom, were extremely anxious that we should not simply roll forward the quotas because we were making promising progress towards restructuring. We wanted the quotas extended for a very limited period while those indications were turned into some practical and credible signs that closures would take place in the countries in which they were needed.
The result was that we finally agreed that it was worth while to maintain the quotas on the products in question for six months, during which time binding guarantees of capacity reductions would be sought. If such guarantees, amounting to 75 per cent. of the over-capacity, were forthcoming, quotas would continue until 1990.
For hot rolled coil and cold reduced sheet, we put precise figures. We agreed that there should be a possibility of prolonging these quotas, provided binding guarantees of 7.5 million tonnes of capacity reductions in hot rolled coil were given by 10 June. I pressed hard to have these precise figures for capacity reductions required in the Council's conclusions, and they are there, as hon. Members will see if they look at the reports that I have given to the House in the past.
I believe that, if that very demanding target of 7·5 million tonnes is achieved, we shall have taken a very worthwhile, major step towards achieving a healthy and viable Community steel industry. If we do not get that restructuring put firmly in place as a commitment by our June meeting, under the terms of the Council's conclusions quotas for these categories will end. I must also say that, as a legal point, prolongation beyond June is dependent upon the Commission's being satisfied that the conditions of the treaty are met—in other words, that a state of manifest crisis, to use the terms of the treaty, still exists for hot rolled coil and cold reduced sheet.

Dr. Jeremy Bray: Can the right hon. and learned Gentleman make it clear that the 7·5 million tonnes which he is seeking in capacity reductions will not involve closures in the United Kingdom or include the output of the hot mill at Ravenscraig? Secondly, can he explain how it came about, if there was that 7·5 million tonnes of excess capacity in Europe, that there is currently such a shortage of hot rolled coil in Europe, and why the delivery period has gone up to 17 weeks?

Mr. Clarke: I can give the answer that the hon. Gentleman would prefer. There is no question of the British Government offering any undertakings of closures to meet any of the targets. One obvious reason for that is that I wish quotas to be phased out as quickly as possible. Therefore, there is no way that I shall go to the Council of Ministers offering to restructure to help to achieve the targets. If other countries want quotas to continue, they will have to come up with the necessary closures.
Secondly, for all the reasons discussed in the previous debate, it is obvious that the British industry is far more advanced in the necessary restructuring than any of the other European industries. Therefore, no one could reasonably look in our direction. We believe that people should look first to the unprofitable centres of production and consider taking the difficult steps needed to get that unprofitable production off the market and permanently closed down.
I have no ready explanation for the shortages of products from mills. Sometimes supplies of products are interfered with by the quotas, which inhibit the ability of companies such as the BSC to move in quickly when there are delays in supplies, because it is not possible—

Dr. Bray: All the hot mills are working flat out at the moment.

Mr. Clarke: I do not think that the hot mills are working flat out anywhere in western Europe. They are working flat out up to their present manned capacity. To the best of my knowledge and belief—I shall look into the matter because the hon. Gentleman is extremely well informed in these matters and almost as close to the steel industry as I am— [HON. MEMBERS: "Oh."] I say that I am closer only because I am a Minister in the Department. I do not believe that the United Kingdom hot mills have been working up to their full capacity for many years. The problem in the British industry is that our hot rolled mills normally work at a lower capacity than those elsewhere in western Europe. We shall leave it to the corporation to decide that problem in future years. Everything depends on the ability to respond to the market, which will be helped if we can get rid either of excess capacity in western Europe or of quotas, or preferably both.
Let me return to the Council's conclusion of 22 December. If sufficient guarantees of restructuring are not received by 10 June, quotas for all products will end on 1 July 1988. I am determined to stick to those conclusions and I hope that the other Ministers will do likewise. In my experience, Council meetings sometimes start as though the conclusions of the previous meeting had never been reached. In practice, we have built on previous conclusions, and the conclusions of 22 December were agreed by us all to be binding on all member states.
I have already said that I shall not offer any restructuring for the United Kingdom. I believe that if sufficient capacity reductions are not given voluntarily to

retain quotas, the ordinary pressures of the free market will force out the less profitable capacity, leaving profitable and efficient producers such as the BSC to take advantage of the opportunities in a more competitive market. We must ensure that we do not then return to competition in state subsidies. To ensure that companies do not cheat by falling back on subsidy, I shall continue to urge the Commission to enforce the ban on state aids as strictly and effectively as it has hitherto. I am sure that Commissioner Peter Sutherland is determined to do that.

Mr. Teddy Taylor: The Minister says that under the existing decision, if the commitments are not delivered by 1 July, quotas will simply stop. Could not the Council, by a majority at its next meeting, decide to extend quotas once again? The Government would not be in a position to veto such a decision, made by majority vote.

Mr. Clarke: It is not like that. I shall give my hon. Friend my understanding of the position, and if I get it wrong I shall correct myself by letter. The Council is governed by the treaty of Paris and not the treaty of Rome with which my hon. Friend and I are reasonably familiar.
As I understand it, if the Commission put forward a proposal, that proposal could be carried by a majority. However, if the Commission put forward no proposal, there is no way that the Council could impose its own regime, except unanimously. If the Commission takes the view that there is no need or legal basis for further quotas and that the undertakings have not been forthcoming, it would require the unanimous vote of all the member states represented in the Council to overrule the Commission's decision. There is no prospect of my failing to support the Commission in that situation. I am quite sure that at least one other Minister—the Dutch Minister—would not move from his position either.
Only if the Commission is induced, contrary to our conclusions at the last Council, to put forward proposals despite the fact that the commitments have not been forthcoming, will we reach the position where in certain circumstances majority voting will be an issue. Given all my dealings with Commissioner Narjes, it would be extremely unlikely if, at this late stage, after all the meetings that I have described, any such proposition were forthcoming.

Mr. Teddy Taylor: My right hon. and learned Friend may be in danger of being too optimistic, despite the super fight that he is putting up, bearing in mind that in paper 640 of 30 November, the Commission made it quite clear that it did not agree with all the conclusions of the three wise men.

Mr. Clarke: Yes, there is always the danger of being over-optimistic. I am always startled when I get to these Council meetings to find that one or two Ministers will launch upon their contributions as if they had never been present, let alone agreed to the conclusions of the previous Council. But, as we go through the various meetings, they steadily realise that time is running out on that kind of proposition. The expectation that every Minister took away from the previous Council was that, unless commitments to a restructuring of the size that I have described are forthcoming, quotas will come to an end. I have no doubt that some will fight a rearguard action.
I do not want to be over-optimistic, but at the moment I feel extremely confident that we have taken the


important step towards getting these restructuring commitments. Removing all that spare capacity from Europe would get to the root of the problem more than anything else. Without restructuring, there will be no quotas but a free market, and, as I have said, no competing state aids within that free market.

Mr. Elliot Morley: The Minister referred to the danger of state subsidy if the quotas are ended because there is no agreement. I am relieved that the Minister is not prepared to concede extra cuts in our own quota, but is he aware that there have been allegations that the Italian steel industry has already been trying to get around the regulations by such means as giving unrealistic delivery dates with a built-in delivery penalty, thereby not making the delivery date and paying the penalty price as a way of subsidising the price of steel? How would the Minister deal with such examples?

Mr. Clarke: I shall deal with the document on state aid in a moment. I have certainly heard such allegations and others. The Commission investigates and enforces the present arrangements. This is a tricky area because several corporations are in such a desperate state that their Governments are seriously tempted to go into state aids. I am glad to say that, whenever this is discussed, in the end the Council unanimously confirms its commitment to enforce the ban on state aids. In the end, it is up to the Commission to ensure that everybody in practice is following that. If there is any solid evidence to support what the hon. Gentleman says, which I do not find too surprising, I would be happy to look at it because we are keen that the ban on state aids is enforced.

Mr. Morley: As the Minister will be aware, such evidence is hard to come by, but does he not agree that it is better to have an orderly return to a free market rather than a sudden end to quotas with dangers of the type to which I have just referred?

Mr. Clarke: These things are alleged to be going on within the quota regime. There are some horribly loss-making businesses in western Europe at the moment, as the hon. Gentleman will know. At the moment it is quite important that the ban on state aids is properly policed and enforced. Of course, we are in favour of an orderly return to the end of quotas. Those were the words used by my hon. Friend the Member for Pudsey (Sir G. Shaw). I am quite happy to agree to that. Occasionally, that word is used by people who really mean a slow return to a free market and who rather resist the end of quotas. If we do not get this restructuring, 1 July is a perfectly suitable date to bring the quota regime firmly to an end.
Let me briefly touch on the other documents, to which I hope I shall do justice without taking up too much time. One concerns the regional fund. As an integral part of the effort to remove the Community's over-capacity, the Commission has also proposed to introduce a regional programme under the European regional development fund, which will provide assistance for steel closure areas.
That programme rejoices in the name of RESIDER. The Commission also proposed to set up a scheme of special social measures, predominantly funded from the European Coal and Steel Community budget, directed at aid to early retirement and re-employment. In order to cover a funding shortfall for these social measures, the

Commission proposed to transfer a sum to the ECSC budget from the general budget of the European Communities.
The RESIDER programme was agreed in principle on 22 December, and adopted on 2 February. I welcome its adoption. The programme provides for some 300 mecu—about £208 million—in the European Community for various measures for small firms, similar to the existing business improvement services produced by the Community in the past, and for infrastructural development. We expect it to support my Department's enterprise initiative. I am anxious to see that as many areas of the United Kingdom as possible will qualify, but it is still too early to judge which those areas will be.
However, the Council did not agree to the proposed transfer from the European Community general budget to fund special social measures. The Council urged instead that the Commission should fund any shortfall in resources for 1988 from the ECSC reserves. On behalf of the United Kingdom, I opposed the budget transfer in view of the tightness of the EC budget, and because I remain to be convinced that the sums required could not be found from the ECSC reserves which I consider to be more than ample for any ordinary purpose, and for this one. I shall continue to oppose any such proposal from the Commission for a budget transfer.
A document has been recommended for debate on state aid. As I mentioned earlier, the continuing strict enforcement of the ban remains an important and integral part of the regime. Document 8993/86 contains a report from the Commission on the application of the rules on aids to the steel industry as required under the previous aids code. The report covers 1984 and 1985, the final years of the old code. The current aids regime imposes a general ban on subsidy to steel.
A document has also been selected—EM 19 October 1987—on the position of Spain and Portugal, which are soon to be integrated fully into the internal ECSC steel regime following the end of their transitional arrangements. In the case of Spain, the arrangements expire at the end of this year; those for Portugal expire at the end of 1990. The memorandum of 19 October 1987 concerns one aspect of the transitional arrangements for Spain and Portugal—the establishment of the permitted levels of deliveries of Spanish and Portuguese steel products to the rest of the Community market.
Restriction of deliveries is permitted during the transitional period, while the Spanish and Portuguese steel industries are restructured and subsidy of their industries is permitted. The Commission proposed in July 1987 to raise the respective delivery limits for 1987. The accession treaty provides for such an increase if the Commission is satisfied with the progress of Spanish and Portuguese restructuring plans. The proposal to raise the limit for Portuguese deliveries was quite acceptable, as their level is negligible and we believe that the industry is genuinely making efforts to restructure.
The increase in Spanish delivery levels, however, caused the United Kingdom and other member states some concern, as we were not satisfied that Spanish restructuring was proceeding as it should. In spite of our repeated requests, insufficient information has been provided concerning progress with restructuring plans, or showing that Spanish firms will have achieved viability by the end of the transitional period as required by the accession treaty. The Government were not prepared to


agree the increase, but our position was unfortunately not shared by enough member states to prevent a majority. The increase in delivery levels was accordingly agreed by the Council of Ministers in November 1987.
The final documents—I apologise for the number of documents, but they have all been selected by the Committee for debate — concern the European Community's trade in steel products with the United States. United Kingdom exports of steel to the United States, like those from the rest of the Community, have been subject to some form of quota restriction since 1982. At that time, the EC-US steel arrangement was limited to 10 categories of steel. It has been subsequently extended and now covers 36 categories, semi-manufactured steel products being the most recent addition in September 1986—and also, incidentally, the most difficult to agree.
In early 1986, the United States imposed unilateral restrictions on Community exports of semi-finished steel products. The Community, in accordance with our rights under GATT, responded by introducing retaliatory measures against imports from the United States. Trade disputes are always extremely unfortunate, and we in the United Kingdom took the view throughout that, in the event of the Community and the United States concluding an agreement on European Community exports of semi-finished steel products, it would no longer be sensible for the Community to maintain its retaliatory measures.
Such an agreement was reached later that year. Under it, I am glad to say, both the Community and the United States agreed to repeal their unilateral measures. The agreement has enabled the United Kingdom to send more semi-manufactured steel products to the United States than was possible under the unilaterally imposed United States quotas. There was in effect a 50 per cent. increase in Community quota for 1986 and annual increases until the end of the arrangement. The Government considered it sensible to enter into that arrangement. The extension to the EC-US steel agreement came into effect on 15 September 1986.
The arrangement is one of several that the American Government have entered into with other steel-producing countries. At the moment, all are due to expire at the end of September 1989. As the House will be aware, political events due to take place in America between now and September 1989 might affect the outlook. Taken together, I believe these measures represent good progress towards our objective of a more open world market for steel. We have taken the necessary steps to safeguard continuing access to the American market for producers of semi-manufactured steel products. Liberalisation of the internal European market is well under way, and might, with good luck, be completed by July. We continue to press for the removal of excess capacity and the enforcement of the rules against state aids.
I commend the motion and ask the House to give its general approval to the stance that the Government have taken.

Mr. Austin Mitchell: As the Minister's triumphant and deeply moving peroration, which I thought he read beautifully, will have suggested, we are dealing tonight with a kind of Euro-dustbin of accumulated measures which, frankly, should have been

dealt with months before. Indeed, my first question is: why are measures relating to decisions, many of which were taken in December, only just being debated now? Why were we not able to debate them at the crucial time?
I do not want to go on about the detail of the measures; I want to come straight to the nub of the matter—the production quotas on steel—because they suggest that the Community is stymied on this issue. It cannot achieve production cuts and cannot agree to remove the quotas. In that situation, it got the three wise men to travel and deliberate. They reported in November-December that there was nothing in the manger—no infant cuts did the wise men discover which might grow to capacity, eventually matching demand. Indeed, they were between £20 million and £30 million short of the cuts that they wanted.
In that situation, the Minister is right to say that the United Kingdom has taken its share of cuts. Indeed, we are not opposed to him. We support him in saying that. However, we want to be assured that in saying that, he will stick to it and that we shall not have another performance such as we had when the Prime Minister went to Europe, saying one thing loudly and bravely, but coming back, waving a piece of paper saying, "No food mountains for our time." We want to be assured that the Minister will not be rolled over, as has happened in the past.
The cuts in the output of steel in this country since 1975 have been massive and far bigger than those of any other member of the Community. Production is now three quarters of its 1975 level, whereas those of other countries are at 80 per cent. or 90 per cent. and, in the case of Italy, at over 100 per cent. of the 1975 production levels. Like Herbert Smith, of the miners in the 1920s, who, when asked what wage cuts the miners had to offer said, "Nowt; miners have nowt to give", the Minister must say "Nowt" to Europe and say it firmly and absolutely. He must say it without hints, with no lawyers' talk about the fulness of time, and no nods or winks about commercial considerations—

Mr. Rhodri Morgan: I seem to recall that historically Herbert Smith of the National Union of Mineworkers used to take his false teeth out first before saying "Nowt". Is my hon. Friend suggesting that as another tactic for the right hon. and learned Gentleman?

Mr. Mitchell: Yorkshire men know that Herbert Smith also used to wipe the sweat of his brow with the slack of his belly, but we shall not go into that tonight.
I hope that the Minister can assure us that there will be no nods or winks about the fulness of time and commercial considerations regarding Ravenscraig. Ravenscraig is central to Scottish manufacturing, steel and industry and Scottish national feeling. In Europe the Minister must hold exactly the same line as he has taken here. There must be no European double-talk that allies the possibility of capacity closures with the closure of Ravenscraig.
The steel industry is at a turning point. We are now getting the necessary return on public ownership. The massive investment and restructuring that took place in the 1970s to form five integrated plants and the loss of jobs and the sacrifices of the 1980s are now reaping success. We now have a lean, productive, competitive industry up to and beyond the best in European standards. What do we do in this situation?
The Government's response has been irresponsible and trivial—to seize the moment with gibbering gratitude for


a quick return by means of the privatisation programme. The money will go into the Government's back pocket. That is despite the assurances of the right hon. Member for Chingford (Mr. Tebbit) during the election campaign that the steel industry was not an early candidate for privatisation and despite the statements of the chairman, Sir Robert Scholey, that the industry wanted to show a record profit before privatisation. The Government have rushed in to grab the moment for privatisation.
The Government have overridden all the assurances that they had given and they have overridden Sir Robert. They have made their traditional approach of the huckster and demonstrated asinine irresponsibility. They will hand the BSC to the speculators because they need the money and there is a hitch in the privatisation programme.
Given the situation, the response of any Government with the national interest at heart would be to use the new power, competitiveness and industrial strength of the BSC to expand production, compete and win back the ground that was lost over the years and to clobber the European competition. A response dictated by national interest would have been to go for quantity even at the expense of profit to go for output—to rebuild the strength that has been lost.

Mr. Kenneth Clarke: Given that the hon. Gentleman is now getting carried away with his arguments about privatisation, is he seriously arguing that our approach should be to go for quantity of steel production regardless of profit? The point of the debate is that we are facing the fact that a number of European companies and Governments have taken such an approach for too long. When the hon. Gentleman comes back to earth and stops being carried away with his own rhetoric, surely he will agree that we must get rid of surplus capacity. Our problem is the need for restructuring. We are trying to close down the kind of plants kept open by people in the Mezzogiorno, who go round spouting the rubbish which the hon. Gentleman is now giving to the House.

Mr. Mitchell: I did not intend to give the Minister the chance to amplify his brief, he has already had long enough to read it. As the right hon. and learned Gentleman is more acquainted with silk than steel he should know that we have taken a much bigger cut in production than any of our European competitors. That is why the ground lost must be made up. The Government's motives are suspect. If their motive is to privatise, they want the maximum return on profit rather than the increase in output that is required by the national interest. Those two things are different. Because of the Government's obsession with privatisation, they are rushing through the privatisation of steel, and that is suspect.
If the Government are to rush blindly into privatisation—

Mr. Quentin Davies: Will the hon. Gentleman give way?

Mr. Mitchell: I shall give way, but not at this moment.
We must face the fact that the Government intend to privatise the BSC. However, when the European quotas go—we want them to go — it will be a much tougher, competitive business. It is estimated that there are 200 million tonnes of over-capacity in the world, and 30 million tonnes in Europe. The Minister has mentioned

Spain. He must be aware that, given that other European countries are building up their steel industries, the BSC is faced with two major disadvantages.
Governments in other European countries have shown that the steel industry is more important to them and their national interest than our Government believe it to be. They have shown that by taking smaller cuts, because they realise the impact of those cuts on the industrial economy, and by declining to take more. That is why the three wise men got such a short response. No volunteers were forthcoming. That shows that they will make every effort to support their steelmaking capacity.
The Minister has assured us that aid will be invigilated. How closely and intensively will he invigilate the invigilators? How can we be sure that no indirect state aid will be given behind the door? I have a copy of the 1985 report by the National Economic Development Office on indirect state aid in the EEC and its impact on the EEC steel industry. It is an impressive piece of research. I shall read some extracts from the document, as it is the fashion of the Government to turn to the executive summary rather than to the full deployment of the arguments. The report states that the term "indirect aid"
includes improvements in general infrastructure where industry does not subsequently meet the full costs (eg new ports), the region of social services which industry would otherwise be required to pay (eg certain severance payments), reductions in the costs of local services etc.".
The report distinguishes two areas where European Governments have been strong in support of their steel industries. In respect of transport, the report states:
All of the four countries subsidise their railways. The level of subsidy varies, being highest in Italy. France and Germany subsidise inland waterways to certain extent and some aid is available in the UK; all subsidise ports (with the exception of the UK). Road transport aid is harder to define".
The report also deals with labour cost reductions. It states that there are schemes for employees threatened with redundancy available in Germany and France. The report gives the figures for the total estimated indirect aid to the steel industry in Europe. In France, labour-related schemes receive £36·7 million and £94 million of transport aid is provided. At the other end of the scale, in the United Kingdom, labour-related schemes receive £12·4 million and a measly £2 million of transport aid is provided. In other words, a massive total of indirect aid is going to the industry in France, Germany and Italy, which is not going to British industry.
France provides a total of £2·25 to £7·22 of indirect aid per tonne of steel produced. The United Kingdom provides £0·78 to £1·66 of indirect aid per tonne of steel produced. Italy provides £2·88 to £6·18 of indirect aid per tonne of steel produced. Other countries provide a considerably higher proportion of indirect aid per tonne of steel produced than Britain does. The British industry is therefore asked to run in a competitive race with a ball and chain around its leg. The Government, who believe in the free market, also believe in slanting that free market in favour of finance and against manufacturing industry. They put up the value of the pound. In real terms, the pound has gone up by 13 per cent. since the last quarter of 1986, which removes the competitive advantage that British Steel has gained in the fall since 1986.
The Government have increased interest rates, which are a burden on the industry, and they are about to increase electricity charges, which are an even more


considerable burden on the industry. The Government expect the industry to run with a ball and chain around both legs.

Mr. Quentin Davies: The hon. Gentleman talks as if it were a virtue to maintain unproductive steel capacity. How can the hon. Gentleman expect the Government to go on pouring money down the drain or proceeding with this massive distortion of resource allocation which he now appears to be advocating?

Mr. Mitchell: I should never give way to the hon. Gentleman. He looks more intelligent than he is. We are competing against those who support the industry indirectly in a way that we are not. That is not equal and fair competition. The Government say that they believe in the free market, yet they are slanting that market against the domestic manufacturing industry to which that industry is central.
As for the increase in electricity charges, I quote from a letter sent to my hon. Friend the Member for Rotherham (Mr. Crowther) by the chief executive of United Engineering Steels:
the proposed increase of 15 per cent. will put up our company's cost by at least £7 million … the 15 per cent. increase is equivalent to reducing our sales margin by 25 per cent.
If that is the cost for one steel producer, what will it be for the entire British steel industry? That is yet another burden that the industry is being asked to carry because of the Government's doctrinaire obsession with fattening electricity for privatisation for more money than they will get from the privatisation of British Steel. If the CBI has managed to get up from its knees and say that this is monstrous, it really must be.
The papers before us tonight are not the real issue. That is, what will happen to the industry in the 1990s, amid intensified competition? It is all very well for the Minister to smile blandly, because he is irresponsibly going for a quick profit while the window is open for privatising the industry—he will grab the cash while it is there. If that is the Government's record while steel has still been a public corporation, when they have been able to draw off money from steel through the external financing limits and to skimp on necessary investment—there has been no major authorisation for two years — how much worse will steel fare when it is flogged off and the Government have washed their hands of it, having given their limp, wet handshake to British Steel and told it to get out into the world?
If the Government weight the odds against British Steel in this way, we shall be launching it into an extremely difficult position, in a highly competitive European market, against competitors that are more effectively supported by their Governments than our Government have ever shown themselves willing to do. Unless the Government commit themselves to doing better by manufacturing industry, by supporting it and running the economy for growth, jobs, expansion, investment and steel, they will launch British Steel on a sea of troubles and wash their hands of the consequences of their own irresponsibility.

Mr. Kenneth Warren: When I read the motion on the Order Paper, I was worried by its tone,

but having heard the speech of my right hon. and learned Friend the Minister, I was reassured that at last we had a Government who would go to Brussels and tell the people of the Common Market that time has run out and they must get themselves organised. The hon. Member for Great Grimsby (Mr. Mitchell) said that the Government—I quote his excellent rhetoric as accurately as I can—had extended to British Steel a limp, wet handshake. That is to ignore the billions of pounds that this Government, and the last Labour Government, have given British Steel to put it in the competitive position in which it finds itself today.
The standards of performance in the integrated strip mills in Ravenscraig, Llanwern and Port Talbot are as good as anything to be found in West Germany or Japan, in price, quality and delivery. We should be proud of those plants for what they have done. It is fascinating that, should any hon. Member want to go to any of those steelworks, he will amost certainly be taken around, as Opposition Members know, not by the management but by the trade union leaders. That is a measure of the confidence and integration of managers and workers in those companies, and of their belief in the future of the enterprises.
It is welcome news that, as my right hon. and learned Friend said, 1 July will mark the end of quotas. The ending of quotas is long overdue. British Steel and the Government have prepared our steel industry for the competitive nature that it will have to exhibit to stand up to its competitors in the Common Market and the rest of the world. We must stand for no more nonsense from the other members of the Common Market, which have had years in which to put their businesses in order. They have had plenty of time to get their work done, and we have set an example which they are long overdue to follow. When we look at the chances of success of British Steel, the sooner the quotas are lifted and the British companies can exhibit their qualities in the world market, the greater will be the profitability and employment in the steel industry.
I agree with the hon. Member for Grimsby also on indirect aid, which is totally unfair. It had been concealed effectively until recent investigations brought out that foreign Governments are prepared to go to Brussels, put their hands on their hearts and say that they will restructure industries, while shovelling money into the support of those industries, against what they plead are the grave and real intentions of the Common Market.
I agree with the hon. Member for Grimsby on one final item—electricity prices. It is gravely worrying that there should be an increase in the cost of the prime commodity which defines the nature of the production of steel—energy. We must not, if we can possibly avoid it, load that great organisation which has been built up with a burden which is not of its own making, which other Common Market countries are not burdening their companies with, and which will hinder the competitive capability of British Steel.

Mr. Kenneth Hind: Will my hon. Friend give way?

Mr. Warren: If I may conclude, I will be delighted to hear my hon. Friend's contribution later.
It would be wrong not to give credit to a former Member, who is now in another place, Lord Joseph. At a very difficult time in the steel industry he stepped out of


the line of policy which one might have expected from him. He went straight into the heart of the Treasury and produced the resolute determination from the Government to get the British Steel Corporation on to a footing which it could get on to only by putting yet more taxpayers' money into it to make it the success it now is. British Steel, when it is privatised, will aptly repay the taxpayers for what has happened.
I view with some scepticism the Americans' attitude to access to their market. In another context I have dealings with American exporters around the world. They seem often to slip past Cocom, just ahead of us, but it is not always easy to get into their markets with traditional products. I hope they will realise that GATT is there for the protection of the whole world. They have perhaps been caught napping on that and may learn from it.
A statement was made in London today by the Japanese ambassador who, recognising the fortitude and capability of the management and workers of British Steel, said of British business that if an Olympic games were held today, our managers and men would be winning the gold medals; and that goes for British Steel.

Mr. Richard Livsey: I am speaking on behalf of my party as the Welsh affairs spokesman and as a member of a family who for three generations have worked in the steel industry in south Wales. For the past seven years we have lived with the European quota system; now we see a real sign of it ending. We welcome that, but we wonder whether Europe has the will power to bring that about. We are pleased to hear that the Minister hopes to phase out quotas by 1 July, but we wonder whether that will become a reality. Removal of the quotas would allow United Kingdom production to expand competitively; there is no doubt about that.
Our hot strip mills are running well below capacity, at around 70 per cent., which means that the fixed costs of the industry are not favourable in relation to output. As the Minister said, our production is the lowest of any EEC country. As hon. Members have said, our current competitiveness has been obtained only at great loss—the loss of 100,000 jobs in the British steel industry. Many of those jobs were in Wales. Before the cuts in the British steel industry, our work force represented 24 per cent. of the steel industry work force in the Community. Now it represents only 14 per cent. That has caused real hardship and has wiped out completely such plants as East Moors, at Ebbw Vale, and Shotton and Corby. There is a massive list of plants that have suffered in England, Scotland and Wales. That is because we have played the game.
There must be no further cuts whatever in the British steel industry. Our capacity is now about 13 million tonnes, which is low in comparison with the possible output of the industry. We are opposed to any further cuts in British Steel, particularly at Ravenscraig, where it is vital that the plant should be kept going. The production in Llanwern and Port Talbot has been outstanding. The investment in those plants has paid off because of the dedication of the work force, and has produced profitable steel at a high output. They are the profit powerhouse of British Steel, and the work force has responded magnificently to that investment.
If we agree to quotas in future, the future of Ravenscraig will be in severe doubt. If quotas remain,

3,000 jobs will be on the line, and 2,000 more jobs in support industries. However, if we are allowed more of a free market, Ravenscraig may eventually get increased investment, but that depends entirely upon what happens with the privatisation of the steel industry. If the Government privatise the industry, there is a need for more market opportunities. Clearly, the market must be freed.
Quotas are not the only factor. An analysis in the Financial Times of 13 November put the crux of the problem rather well:
The British Government has promised not to reconsider the future of Ravenscraig
for the time being. It continues:
West Germany is refusing to give up any of six hot strip mills on the ground that they are among the EC's most efficient, a position further complicated by the age-old rivalry between Germany's two biggest producers, Thyssen and Kloeckner. On top of that, the Italian and French Governments could suffer political crises if there were major plant closures at Italsider and Usinor-Sacilor.
Therefore, immense political problems are bound up in the business of quotas.
It is no accident that many of the steel plants in Europe are sited in areas of high unemployment. In the past, investment has been deliberately made to overcome some of those problems. It will take great political will on the part of those European Governments to grasp the nettle. I am not convinced that the Minister can push them hard enough and that he can provide cast-iron guarantees that the quotas will be phased out. Therein lies the rub.
The fluctuations in the pound also need to be considered, as they can affect the level of competitiveness. Indeed, I request the Minister to urge the Government to join the European monetary system as soon as possible. That would provide greater stabilisation of prices in Europe, and those prices would not be distorted.
The hon. Member for Great Grimsby (Mr. Mitchell) and others spoke about state aid. There is no doubt that it is almost impossible to police state aid. It is one of the most difficult subjects that the Minister has to tackle. It is difficult to identify hidden state aid. Some of the plants that are under threat in Italy are in the south of the country. That area is very poor, and very difficult political decisions will have to be made.
There must be cast-iron assurances about the policing of state aid and the phasing out of quotas so that the British steel industry will be able to benefit from its newfound competitiveness.

Mr. Teddy Taylor: My worries about this proposal are reinforced by the speech of the hon. Member for Brecon and Radnor (Mr. Livsey). There is a great similarity between what we are doing tonight and what the Prime Minister announced last week. She announced that we are to give an enormous amount of additional money to the Common Market because we have received assurances that things are going to get better and that agricultural spending will be curbed. When we pointed out that we had received exactly the same assurances in 1984, we were told that we were spoiling everything and that instead we should talk about all the exciting new developments that will arise because of stabilisers, restraints and goodness knows what.
Every hon. Member knows that the agreement to pour more money into the Common Market will lead to exactly


what happened last time. Even if the so-called curbs were to work, the Commission could get round them quite easily by means of accountancy devices. Everybody I speak to in private conversations knows that it is a sick joke and that all we have done it to pour more money into the Common Market to finance what is already being done.
In 1985 we were given solemn, binding pledges, recorded in Hansard, that there would be an extension of quotas for a maximum of three years. We were told that three years might not be needed, but that three years would provide more than enough time to sort out the European steel industry. Tonight we are being asked to extend the quotas in the hope of obtaining assurances. But the cuts are not agreed. We are told only that the Government hope that they will soon be agreed and that quotas will come to an end.
The Minister referred to an extension of six months, but he did not have time to explain that it will not be just for six months. For plate and heavy sections there will be an extension to the end of 1990. According to my calculations, subject to metric measurement, that is not exactly six months.

Mr. Kenneth Clarke: My hon. Friend is referring to the proposal. We have agreed to a six-month extension, after which the quotas will come to an end, unless there is a commitment to restructure the industry.

Mr. Taylor: I am referring to the paper that was presented to us today by the Under-Secretary of State for Industry. If the restructuring pledges are not made and if the Commission then proposes another six months or a year, is there anything that the Government can do about it if a majority of the member states say that there should be yet another extension? Despite the solemn pledges of 1985, I fear that we have agreed to another extension, in the hope that something will turn up.
The British steel industry is at least as competitive as those of other European states, but what about the rest of the world? In its relations with the rest of the world, Europe is becoming more and more protectionist with every day that passes. We talk about competitiveness and free trade, but we impose the most horrendous restrictions on trade with the Third world and other areas where the costs of production are very low. I fear that we are making the Common Market into an organisation that will try to live by taking in other people's washing.
As to costs, Europe is becoming a high-cost economy, covered with protection in almost every area. Europe is awash with unemployment. The Minister from his previous position may be able to confirm whether I am right in saying that the current level of unemployment in the European Community is higher than in any other country or group of countries in the world with the exception of Tibet and E1 Salvador, where there are special considerations.
I fear that on agriculture and steel we are just getting pledge after pledge. We are congratulating ourselves in the hope that something will happen in the future, but all we do is pour in more money, become more uncompetitive with the rest of the world and thereby dig our graves on competitiveness.
I have two brief questions which I think deserve answers. We have been told that this is just for another six

months and that if we do not get pledges of some kind in six months, quotas will stop. What happens if we get pledges? What happens if they say, as the farmers have said, "We will try to cut back." I am sure the hon. Member for Brecon and Radnor will appreciate that it is difficult for farmers to give such assurances. The assurances they have given are like those one would get from a 12-year-old child if one said, "I promise to increase your pocket money if you guarantee that you will not grow by more than an inch a year." Most children would sign such a pledge quickly and mean to keep it, but it is very difficult for children to promise not to grow.
That is what has happened on the CAP. The farmers mean well, and the countries mean to do it, but they cannot, because of the pressures. What happens if we get assurances? What happens if the countries agree to cut their steel industries? Does that mean that quotas continue, or does it mean that they stop?
Secondly, if the countries do not agree, and give no commitment, what happens then? The Minister has been studying this for a long time and I am in no sense an expert. But my understanding is that, because this is under article 85, the Commission simply puts forward a proposal for an extension: the majority of member states agree, and quotas go ahead as before.
Finally, does the Minister not think that there is merit in the suggestion that, while we may be becoming more competitive within the EEC, we are becoming, in the rest of the world, more and more protectionist and high-cost, and therefore more and more awash with unemployment? Britain stands out like a beacon because of the Government's policies. Our unemployment is down, while Europe's unemployment, sadly, is the worst it has ever been. Therefore, we must ask ourselves if it is a good thing to have a reunion.
After the solemn pledges that it would be an absolute three-year maximum, with no question of it being continued, is there not a danger that the Minister will come back in another six months with the assurance that the countries are going to try to cut back, like the child and the pocket money pledge, or with a statement that he is afraid that we shall have to have another six months of quotas because the majority voted against doing anything?

Dr. Jeremy Bray: The Chancellor of the Duchy has been handling the negotiations with considerable skill and determination in the short time that he has been Minister. I am sure he is aware that the problems which he has been dealing with in the steel industry go back many decades. He should not get too frightened about the talk of a necessity to work at 90 per cent. capacity. Other industries which are less capital-intensive have managed to survive with 70 to 90 per cent. capacity without the trauma that there is in the steel industry.
The problem comes from the incontinent behaviour on pricing. Selling steel is fairly complicated. Late delivery and such things make it difficult to identify a clear market price. Thought should be given to less incontinent behaviour that would ease the transition to a fully competitive regime. It should be possible to see beyond the preoccupation with excess capacity to the next stage, that of inadequate capacity. It takes about 50 years for the steel industry to work through that well-established cycle.
If one is reasonably optimistic about the course of development in world trade, with reference to the latest report by MEPS Europe that was used in the Arthur Young study, that points to the coming danger of inadequate capacity.
The problems that will arise if we reach a better balance in production concern the cyclical behaviour in the steel market, with stockists screwing the thing up totally and there being mystery about what is happening. Demand for steel will decline because orders are banged in quickly to get delivery in time. That trend tends not to affect final levels of demand, but it produces many headaches for producers who get into difficulties concerning allocation and plant scheduling.
Without wishing to add to the Minister's problems, I expect that this transition will be easier if the European Community begins to look outside at what is happening in the rest of the world. In industrial terms, the biggest tragedy of the modern world is its failure to use the immense industrial capacity of Japan. The loss of human capacity, in the rundown of Japanese industry, including steel, is a great loss to mankind.
The imbalance that that represents is the inability of the developing world to buy steel, to invest adequately and to build up infrastructures to meet its huge needs. There needs to be a shift of balance between the great funds that Japan has to invest overseas, the inadequate servicing of debt to American banks and the wish of the developing world to invest in infrastructure. That position could begin to change if the steel community was less obsessive about its capacity problems and more understanding about the directions of development of world trade.
I am not offering an easy or short-term solution. If the Minister is dealing with problems of inadequate supplies of steel a year from now — and that is possible in Europe — he will need to look much more widely for opportunities and sources, and study the nature of world trade then, and the problems at that time.
Dealing with the specific question of hot rolled coil, the problem is not in relation to capacity of hot mills, but the long pipeline of supply. Llanwern does not have sufficient continuous casting capacity and is not able fully to load up its hot mills. There are blockages in supply, and although there are manned capacity problems, they cannot be corrected overnight in the steel industry. There are very difficult problems to face in a planned market; there are considerable advantages in a much freer market, for which we are heading. But moderation of behaviour is needed from the steel industry in its commercial practices, which will be quite a test for it in the next few months.

Mr. Rhodri Morgan: I have just one question to put to the Minister. Did I hear him say that, on one aspect of the European Coal and Steel Community's job creation provision for helping to staunch job losses in steel closure areas, he hopes to be able to get most of the money for the United Kingdom for the enterprise initiative that he announced a month ago?
If that is correct, is he not saying that this is a reference to article 15 of the new regional development fund programme that was announced some two years ago? Will he confirm that since then his Department and the Treasury have been having a running battle with the fund as to whether the article 15 money is to be spent by local enterprise agencies, which is the view of the European

Community, or, as is the view of the Treasury — naturally enough, given its interest in clawing back all the EEC money for central Government plans—is to be used as a way of saving the Government the money it wants to spend on regional development in this country?
Does the right hon. and learned Gentleman not agree that it was rather naughty of him to claim one month ago that the enterprise initiative was a great new initiative that was going to create jobs in the regions? What he meant, if I understood him correctly tonight, was that the EEC would be paying for it, and, if he was not able to persuade the Community that that was a proper use of article 15, local enterprise agencies that could do the job very much better would be able to get their money from the EEC in the way the European Coal and Steel Community intends.

Mr. Kenneth Clarke: The last point was rather ingenious, bringing in the whole argument about additionality and wider issues on the European regional fund, rapidly switching to article 15 and the fund generally.
Some of the difficulties that we have encountered in making local propositions for funding to the European Commission have recently been resolved. To answer his point, I will let the hon. Gentleman have a note of where we are in trying to sort out the relationship between local government applications and the Government's view of European funding.
What I have described is the early days of the RESIDER programme. I do not think that we have yet addressed the issues that he is describing. It is certainly true that one of the principal beneficiaries of the funds from the RESIDER programme will be the enterprise initiative, but there will be more to it than that.
I will deal briefly with the points that have been raised in a debate which at one point was arousing rather more passion than I had expected.
The hon. Gentleman the Member for Great Grimsby (Mr. Mitchell) said that there had been some delay in arranging this debate, and that is certainly true. That is a matter that has to be discussed through the usual channels to try to ensure that we get on to these European debates in reasonable time in future.
From what I have heard, I do not think that the Government have taken any decisions in this field with which any hon. Members who have spoken disagree, so Parliament's interest has not been prejudiced in any way. It is also the case that large numbers of documents are referred for debate. I took up some time earlier giving the necessary detailed explanations of the documents on the agreements between the United Kingdom and the United States and the arrangements with Portugal and Spain. It was not surprising that these did not command wide interest in the debate that followed.
Not surprisingly, the debate concentrated on the key point of the future of production quotas and the effect this will have on the privatised British Steel Corporation when we get back to a free market. My hon. Friend the Member for Southend, East (Mr. Taylor) was very scathing about our prospect of ending quotas as we are going at the moment. We have now ended quotas altogether on long products. They came to an end at the end of last year. We are dealing now with flat products and heavy sections, and


quotas on those two products will not continue beyond the end of June of this year unless credible assurances are forthcoming on getting the excess capacity out.
My hon. Friend asked again about the constitutional position. I am simplifying it, but I hope accurately. If the Commission puts forward a proposition, majority voting determines the outcome on the proposition by a system of weighted voting that is applicable to the Council. But if the Council of Minsters wants to put forward a proposition despite the Commission's opinion, unanimity is required for the Council to impose its own solution. No unanimity will be possible on anything that extends quotas, despite a lack of assurances, because the British and Dutch—I can speak confidently about the British—will not agree to any such Council proposal going forward.
It is possible that people will put pressure on the Commission to put forward a proposal, but the Commission so far has been resolute on this matter. Commissioner Narjes has been clear in his opinion, and I would regard it as an extraordinary reversal of every previous assurance on its part if it went back on them. It is not altogether true that it has gone back on matters in the past.

Mr. Teddy Taylor: rose—

Mr. Clarke: I shall not tonight be drawn into the wider issue of the EC.
My hon. Friend the Member for Southend, East waxed lyrical about what he described as solemn pledges given in 1985 and made it sound as though they had been given at least on cub's honour, if not stronger. In fact, the then Minister of State, Department of Trade and Industry—before being interrupted by my hon. Friend the Member for Southend, East—said in the debate in 1986:
The Commission also proposed the progressive liberalisation of the system to reflect the improvements now being seen in the market and designed to pave the way towards the return to a free market in 1988 or 1989".—[Official Report, 12 March 1986; Vol. 93, c. 1032.]
That does not strike me as the most binding guarantee of the kind that my hon. Friend now says has been violated, and we have not yet reached 1989. Perhaps quotas will have come to an end by then.
I think I interpret correctly the remarks of the hon. Member for Great Grimsby when I say that, in the end, we have all been talking about the ending of quotas— that it is an agreed objective that we should, at a sensible pace, end quotas. As the hon. Member for Brecon and Radnor (Mr. Livsey) said in one of the more understated points of the debate, it is essentially a political problem and a matter of political will in other countries.
As for where the unprofitable capacity is and where we are looking for the closure of steel plants, we are looking at some of the older industrial parts of western Europe; we are looking to the Mezzogiorno, to parts of the Saarland, to places near the border with East Germany and to parts of Belgium and Luxembourg which are heavily dependent on older industries.
That explains the difficulties which other Ministers encounter. I made some less than complimentary remarks about the behaviour of some of them at meetings. One is asking colleagues from other European ministries to do the equivalent in their parliaments of announcing the end of Ravenscraig. I suspect that I would find myself in some difficulty if I were to do that here.
Economic arguments and logic point to their doing that because we have surmounted some extremely similar hurdles in our time, leading to the closure of much of our unprofitable and surplus capacity. They must do the same if anybody is to have a secure future. We have that behind us and we are now into a more profitable stage. We are therefore able to say that we will not offer anything towards the restructurings proposed. We do not mind if the quotas go, anyway, so we have no motive to offer any further restructuring. We made our position clear on Ravenscraig in the last debate. We are in that position because we have a profitable British steel industry ready now to take advantage of the more open market.
Where I got nearest to misunderstanding the hon. Member for Great Grimsby was when he gave a long description of our level of output and the level of state aids that other countries give. I agreed with the analysis in the report to which he referred. I suspect it is true that indirect state aids are much higher in some other western European countries than they are in this country. That underlines how well the British Steel Corporation is performing; it is profitable compared with them.
The hon. Gentleman made it sound as though he was expounding a case for raising our output regardless of profit. Indeed, he said so at one point. He spoke as though he envied those great state aids and thought we should pour more of them into British industry. He will appreciate on reflection that that is exactly the conduct that all three parties in the House have been deprecating on the part of other member states and companies. It is the behaviour we propose to bring to an end, and it would be a disaster if Labour Members got drawn back into advocating it. They used to follow it, but I trust it is no longer their line.

Mr. Austin Mitchell: That has been the case ever since the present Secretary of State for Wales was Secretary of State for Trade and Industry. My point concerned raising output, if necessary at the expense of profit, but not going for profit as the Government are.

Mr. Clarke: I repeat that at the moment we are suffering from no particular lack of capacity. It was quite the reverse over Europe and the world as a whole. Some Members took a somewhat wider view. In the earlier debate, the hon. Member for Cardiff, West (Mr. Morgan) acknowledged the wisdom of some of the strategies being considered by British Steel, which is going more for the finishing and added value end of the process rather than simply increasing the quantity of steel being produced in this country.
The hon. Member for Motherwell, South (Dr. Bray) dealt with our surplus capacity in hot strip—yet again. I made it clear that at the moment the mills are working to full manned capacity, but that that is only about 70 per cent. of the potential capacity. That remains one of the lowest uses of capacity in western Europe and reflects a particularly high level of demand throughout western Europe at the moment but one that the Commission does not think is likely to be sustained. We should all be delighted if the market recovered to the extent that we could sustain 90 per cent. capacity. That is not impossible. There are other industries that do.
The hon. Gentleman said that the mills were threatened by incontinent pricing. The cut-throat commercial practices that occur in the steel business and attempts to


go in for very aggressive pricing when the opportunity arises reflect the excess capacity in western Europe, which we need to tackle and which lies at the root of the debate.
As we return to a more liberalised regime in the EEC and between Britain and the United States, and as the world's industry is sorted out, those in the steel industry will be able to address themselves to potential markets in Japan and so on. I particularly look forward to the management of the privatised British Steel Corporation addressing itself to the issues. As we emerge from the closed, cartelised and protected world imposed as a necessity on a steel industry in chaos, the British steel industry is emerging as the industry that has gone through the most effective restructuring and undergone the most dramatic changes in its production and marketing. It is now profitable and has low production costs and can look forward with great confidence to the future. The general view of the House is that we should ensure in our European negotiations that we get rid of the remaining impediments to BSC's competitive position in the European market and enable it to take full advantage of all that it has won so far, thanks to the achievements of its management and work force.
Question put and agreed to.
Resolved,
That this House takes note of European Community Documents Nos. 8560/87, the Supplementary Explanatory Memorandum submitted by the Department of Trade and Industry on 1st December 1987 and 4127–88 on steel policy, 8803/86 and the proposals described in unnumbered Explanatory Memoranda submitted by the Department of Trade and Industry on 7th July 1986 and 15th July 1986 on trade with the United States of America in certain steel products 8993/86 and COR 1 on aids to the steel industry (1984–85), and the proposals described in the unnumbered Explanatory Memorandum submitted by the Department of Trade and Industry on 19th October 1987 on delivery levels of certain steel products of Spanish and Portuguese origin onto the rest of the Community market; supports the Government's commitment to a Community steel regime which provides a framework for a steady return to free market conditions; and endorses the Government's agreement of measures which place a temporary limit on steel exports to the United States of America, thus safeguarding access to the American market.

Maternity Allowance

Motion made, and Question proposed, That this House do now adjourn.[Mr. Kenneth Carlisle.]

Mr. Richard Holt: Imagine the excitement in a household when a woman discovers that there is to be an addition to her family — a first child. She looks forward eagerly to the day when the baby will be born and to the benefits that will go with it. Then she finds that her application for maternity benefit is denied because of two things in juxtaposition: she has changed her job, and her present job is paid monthly rather than weekly. As a consequence, she is disbarred from receiving maternity allowance. Doubtless she will say, "That's a bit rough. I've been working for 10 years and paying my contributions. I deserve it." But she is not thinking like the bureaucrat with the bureaucratic mind, who, like Shylock, reads only about the pound of flesh and not about the blood.
My constituent, whose baby is now 14 months old, wrote to me to say that she has been disbarred from receiving maternity allowance because she does not satisfy the requirements. It appears that the requirements are twofold. First, the person must satisfy the strategic conditions appropriate to the nature of the benefit — retirement, incapacity, unemployment and so on. Disputes on that are determined by an independent adjudicating authority. It is a bit difficult to dispute the fact that someone is pregnant. It is reasonably easy to agree on whether a person is pregnant.
The second criterion is laid down in section 93(1) of the Social Security Act 1975. I cannot for the life of me believe that, whichever party was in power—it happened to be the Labour party—it was the intention of the legislators that a person could be disbarred from an allowance simply because he or she was paid monthly, not weekly.
To be eligible for the maternity allowances, a woman must have paid 50 benefit credits in the year preceding the delivery of the child. But if it so happens that one works for 49 weeks before 1 April, and the fiscal year begins on 6 April, that crucial week between 1 and 6 April becomes the 50th week of one's qualifying period. If, because one becomes a monthly paid employee, one's employer determines that one's credits are not paid over to the state until 30 April, because that is the nature of paying people on a monthly basis, one is deemed not to have paid one's credits for the first week of April or the last week of the preceding fiscal year, or, more crucially, the 50th qualifying week in order to obtain benefit. Therefore, one is disbarred.
That is lost in the mish-mash of bureaucratic language. I am told that the Secretary of State's determination is binding. Once the Secretary of State has made a determination, that is the end of it. I have a copy here of the Secretary of State's determination in the case of my constituent, Mrs. Watson. It says that she does not satisfy the second criterion for maternity allowances. That is cut and dried. At the same time, my constituent is told that she can appeal. How does one appeal when one has been told beforehand that the matter is cut and dried and that the law does not allow for any appeal?
In the past few years, I have had another case involving the Department of Health and Social Security. It started in 1985. A constituent of mine and his wife came to see me because he believed that his retirement benefit had been


wrongly calculated, and he asked me to investigate. I did, and I found that the ministerial decision was that the DHSS was right and my constituent was wrong.
Last week, quite out of the blue, nearly three years later, my constituent received a letter and inside was a handsome cheque. On the back of the letter it said that on a point of law my constituent should not have been disqualified from his benefit.
I wonder whether, on a point of law, Mrs. Watson should not have been disqualified from her benefit. I wonder whether anyone has ever tested this in a court of law. I wonder whether that is what Parliament wanted. The logic of section 4(2) of the Social Security Act 1975 is that liability for the payment of national insurance contributions arises at the time earnings are paid, regardless of the period to which they relate.
Let us take the case of the lady who is a retained sales agent in the furniture industry—I know one such person — and is paid on commission only, at quarterly intervals. God help her if she becomes pregnant, because the chances of her getting the 50 weeks in before the three months are pretty negligible. Mathematically, I believe that they are almost impossible. So, by definition and by law, anyone who is over one month in a payment period and who is female and becomes pregnant must lose her benefits and allowances.
I may have approached the issue in a slightly lighthearted manner, but it is quite serious. I cannot believe that this is what was intended when the law was framed, or that the Government really want to leave such a stupid loophole, so that they now find themselves on the hook. I am sure that they wish to heaven that they could find a way out for Mrs. Watson, as they did for Mr. Gaines-Burrill, on a point of law, and send a handsome cheque for four hundred quid to my constituent, who has so far been denied it.
I shall leave the matter to my hon. Friend, to whom I have been writing and talking for several months, both semi-formally and privately over a cup of tea. I know that he is sympathetic; however, I also know that he is only the Minister, and as such has not the powers to rise above the bureaucrats and tell them that they have got it wrong. They will want to wave at him the piece of paper that says, "This is the law, dated 1975."
There are two things that my hon. Friend can do, if he is to do anything. He can bring in legislation to change the law, or he can resign. Either way, I want him to tell me how I can face anyone else who comes along to me and says, "I am in a terrible state. I am paid monthly, and I am pregnant."

The Parliamentary Under-Secretary of State for Health and Social Security (Mr. Michael Portillo): I congratulate my hon. Friend the Member for Langbaurgh (Mr. Holt) on obtaining tonight's Adjournment debate, and on pursuing the cause of his constituent so assiduously. As he says, he has taken up the matter with me on numerous occasions, both in correspondence and in conversations face to face, and I do not think that any constituent could have had a better advocate than Mrs. Watson has had tonight.
Mrs. Watson has certainly been most unfortunate in not qualifying for maternity allowance, and she has failed

to do so by a hair's breadth. She claimed the allowance from her local social security office at Eston on 13 October 1986. To qualify under the rules that then applied, a women needed to satisfy two contribution conditions. The first was that in any one tax year she must actually have paid contributions equivalent to 25 times the lower earnings level at which national insurance contributions become payable, and Mrs. Watson satisfied that condition. The second was that she must in the relevant tax year have paid or been credited with contributions the equivalent of 50 times the lower earnings level. The relevant tax year is governed by the benefit year in which the claim occurs.
In Mrs. Watson's case, the relevant income tax year was 1984–85. Mrs. Watson was unemployed for most of that year. She was signing at the local unemployment office until 30 March 1985: that covers a total of 51 weeks. However, as Mrs. Watson went abroad for two weeks and was not available for work, she received unemployment credits for only 49 weeks. That still leaves one week unaccounted for—the very last week in the tax year.
Mrs. Watson started to work with South Tees health authority on 1 April 1985. Her employer paid wages monthly on the last working day of each month; Mrs. Watson's first pay day was, accordingly, 30 April 1985. As such, liability for contributions would fall in the new tax year, 1985–86. Her employment did not therefore assist her contribution record for 1984–85.
My hon. Friend has argued strongly that, because Mrs. Watson worked for the last week of the 1984–85 tax year, part of the contribution paid on 30 April 1985 should be reallocated to that year. I perfectly understand his reasoning, but unfortunately the legislation does not work in that way. Legislation cannot just be set aside in quite the way that my hon. Friend might like.
Liability for the payment of national insurance contributions arises at the time earnings are paid, regardless of the period to which they relate, as my hon. Friend accurately repeated. The extent of the liability is then determined by the interval at which the earnings are paid, known as the "earnings period". Thus, if, like Mrs. Watson, a person is paid regularly at monthly intervals, contributions are calculated by reference to a monthly earnings period and liability arises only on the date on which the earnings are actually paid.
There are a number of reasons for adopting that procedure. It evens out the liability for contributions, ensuring that, for a monthly-paid employee, there will be 12 payments of contributions in a year. More importantly, to ask employers to calculate contributions over split periods would impose a real burden on them which could not be justified for the handful of employees who might benefit from it.
In passing, I advise my hon. Friend that, whereas Mrs. Watson has been unlucky in this case and has fallen just short of a contribution record for a year, of course the way in which the contributions fall might in another case have helped her to make up the contributions in the following year if she had been deficient. One can fall either side of that line.
All this means, of course, that Mrs. Watson's contribution record for 1984–85 was 49 credits and she was one short of satisfying the contribution tests and qualifying for maternity allowance. I fully accept my hon. Friend's comment that, had she delayed starting work by one week, she would almost certainly have been entitled


to a further unemployment credit and hence satisfied the test. It is, of course, an inevitable consequence that wherever one draws the line, someone may fall the wrong side of it.
My hon. Friend may feel that Mrs. Watson should have been better advised about this situation, but of course, that would have meant predicting that 18 months later she was likely to become pregnant and would seek to draw maternity allowance. To recognise the significance of the missing credit 18 months before is not a realistic proposition.
As my hon. Friend knows, Mrs. Watson appealed against the adjudication officer's decision disallowing her maternity allowance. By law, questions relating to contribution conditions are reserved for determination by the Secretary of State, although in practice those decisions are given through specially authorised officers of the Department. Mrs. Watson subsequently applied for a formal decision from the Secretary of State regarding satisfaction of the condition for 1984–85. All aspects relevant to the second contribution test were considered afresh.
In coming to a decision, the officer for the Secretary of State is strictly bound by the provisions of the Social Security Act and regulations. He has no power to waive or relax those provisions in any circumstances or in any particular case. The decision was that Mrs. Watson did not satisfy the second contribution condition.
However, it was open to Mrs. Watson to appeal to the appeal tribunal, which she did. As a matter of fact, it was just this morning that the appeal tribunal heard the case and gave the decision that there was no title to maternity allowance.
The combination of circumstances faced by Mrs. Watson was unusual. I reassure my hon. Friend that in 1986 there were 350,000 successful maternity allowance claims, so he can put the case into context.
I now want to make the important point that, from April 1987, the old rules that applied to Mrs. Watson have been scrapped. My hon. Friend called on me a moment ago to do something about this and I think that at one point he invited me to resign, so I assure him that the rules have already been scrapped. Instead, we have today statutory maternity pay, paid by the employer. We have also changed the rules for maternity allowance, which may still be payable where there is no entitlement to statutory maternity pay.
Under the new provisions, an employer is required to pay statutory maternity pay to an employee who has worked for him for at least six months up to and including the 15th week before her baby is due and whose average weekly earnings in the last eight weeks of that period are above the lower earnings limit — currently £39. If a woman does not qualify for statutory maternity pay, perhaps because she has recently changed jobs, she will be entitled to maternity allowance providing she has worked and paid full-rate contributions in at least 26 of the 52 weeks ending with the 15th week before the baby is due: in other words, a recent record of being in employment, quite different from the more distant record of contributions credited—the position that Mrs. Watson was trying to satisfy.
The distant reference period for qualification, which applied to Mrs. Watson's case, is no longer relevant today. Therefore, she is doubly unfortunate in that she failed narrowly to satisfy the former test and, if her baby had

been due a few months later, she would have been eligible under the new rules. I hope that my hon. Friend does not consider that I am rubbing salt into the wound by telling him that if she were in a similar position today she would undoubtedly qualify either for statutory maternity pay or for maternity allowance. I am sorry that I am only able to give that disappointing answer to my hon. Friend, although I believe that he will be happy to know that the rules have been changed.
Let me say a word about the case of Mr. Gaines-Burrill. My hon. Friend has written to me about this matter and I owe him a response in due course. Mr. Gaines-Burrill claimed a dependency increase for his wife in January 1985 following his retirement. At that time, the adjudication officer disallowed the dependency claim on the grounds that Mrs. Gaines-Burrill was in receipt of an occupational pension of £85 per week that could be treated as earnings and that she was not to be regarded as dependent upon her husband. The adjudicating authorities at that time were satisfied that this decision was correct in law.
A social security commissioner's decision of June 1987 disturbed that view. The commissioner held that for certain benefits, including retirement pension, an occupational pension can be treated as earnings only if the dependant receiving it was at the same time engaged in employment. We were then faced with the problem that an estimated 1,700 past claims, similar to that of Mr. Gaines-Burrill, had been wrongly decided in the period between November 1984 and June 1987.
All practical steps were taken to identify the wrongly decided cases from departmental records. Mr. Gaines-Burrill was one of those identified and the earlier wrong decision of January 1985 was referred back to the adjudication officer for a revised decision. The adjudication officer's revised decision, following the social security commissioner's decision, was notified to Mr. Gaines-Burrill and at the same time arrears for the maximum period of 12 months allowed by the law were paid into his bank. Unfortunately, the notification of the decision was not sent to Mr. Gaines-Burrill until a week after he had received his arrears.

Mr. Holt: I am an innocent who believes that the law is the law. If the Department made a mistake in law according to the commissioner, and therefore had to pay the back pay, how can that total amount of back pay be negated to a maximum of 12 months by a subsequent element of law? Which law predominates—a law that says that a mistake was made and therefore that the total amount of money should have been paid or the overrider that says a year is a maximum?
In that case, if the adjudicating officer had not pulled his finger out and had not woken up for six years, Mr. and Mrs. Gaines-Burrill would still only have the benefit for one year and would have lost the benefit of five years. As it is, they have lost the benefit of 22 months and I do not see that there is anything fair in that. I should like that explained.

Mr. Portillo: I was coming to precisely that.
The Government believe that the commissioner's decision introduces an inconsistency into the law by treating a substantial occupational pension as though it were not earnings for the purpose of determining whether a person is dependent. In the Social Security Bill that is


currently being considered in another place, we seek powers to reintroduce the consistency until the commissioner's decision is generally understood and applied.
What I am about to say is a matter of speculation, but the Government's view of the law as we now understand it, following the social security commissioner's decision, is that the law is so inconsistent that that must be changed. It does not make sense to us that one should regard some earnings as earnings but disregard an occupational pension. A person with an occupational pension of £85 cannot be regarded as being dependent on her husband. Although this is speculation, if the Government had become aware, before the social security commissioner's decision, that the law was as it has now turned out to be, we would probably have sought to put the law right earlier.
That is why it was right that, last year, we took powers to limit to 12 months the arrears payable in cases where an adjudication officer had decided a case in line with what was thought to be the law, but where that view was subsequently overturned by a commissioner's decision on a point of law. Otherwise, claimants would receive several years of benefit in respect of a matter which neither the Government nor Parliament had intended to be the norm and which had not been dealt with because the social security commissioner had not yet reached a decision. It has always been understood to be something quite different.
I shall write to my hon. Friend the Member for Langbaurgh about the case of Mr. Gaines-Burrill, but I hope that the debate has given him an opportunity to understand the matter.
Question put and agreed to.
Adjourned accordingly at five minutes past Twelve o'clock.